Tax time – What is an S corporation?

We all know the basics of becoming a company. There are sole proprietorships, partnerships and corporations. So what is an S corporation? And why do some people say this is a good way to save money on Taxes? I don’t really know a lot about accounting or finance laws but this is something I read about that is supposed to provide payroll tax savings. So they say that a one-person sole proprietorship without any other employees can’t take the qualified production activities income deduction because the deduction is limited to fifty percent of the firm’s wages. But as S corporations, these businesses would become eligible to take the qualified production activities income deduction, which equals 6% of profit in 2007, 2008, and 2009. With an S corporation, the owner-operator has to categorize some reasonable percentage of the profits as wages.  I suppose this is interesting if tax law really turns you on…

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