If you’re considering partnering your small business with CSI’s monthly accounting service, you may wonder if you’re a good fit to work with us and get the right value out of our service.
For some, looking at your business entity type and comparing it to our client base can mean a lot. However, it’s definitely not everything!
Let’s examine the following questions that we get about the small businesses we work with:
- Should I still work with CSI if I’m not an S-Corp?
- Do most of CSI’s clients start as S-Corps, or does CSI change their structure?
- What are the pros and cons of being an S-Corp?
Am I a Good Fit for CSI if I’m Not an S-Corp?
Just because a majority of our clients happen to be S-Corps doesn’t mean that we can’t work with you if you aren’t one!
We can handle other business structures as well. Here’s an approximate breakdown of our current client base:
- 70% S-Corps
- 12% Schedule Cs
- 12% 1065s
- 6% 1120-Cs
Plus, we can help you decide when – if ever – you should become an S-Corp. We can even start the initial conversation about it right away in our onboarding meetings.
Do Most Clients Start as S-Corps?
When we say that a majority of our clients are S-Corps, we know that you might wonder whether they started that way or if we changed them to that structure.
We would say it’s about 50 / 50. Approximately half of our S-Corp clients came to us as that structure, and we helped the other half decide to change over time.
Of the 50 percent that changed to S-Corps while working with us, about 80 percent of them made the change immediately – during onboarding. During that time, we do deep discovery conversations on your business, so if we notice you’re ready to make the change right away, we’ll let you know.
Let’s look into some of the details behind what being an S-Corp entails.
Pros and Cons of Being an S-Corp
A simple way to think about an S-Corp is to remember “SMALL-Corp.” In order to be an S-Corp, you need to have less than 100 shareholders, all shareholders must be U.S. citizens, and you cannot be publicly traded on the stock exchange.
Here are some of the pros and cons of being an S-Corp, including S-Corp tax implications.
Pros of Being an S-Corp
- Offset losses. If you had a loss for the year and have an additional job, you may be able to offset your losses against your other job’s W2.
- Potentially lower tax rate. If you’re comparing corporations, an S-Corp is taxed at the individual’s tax rate, which is typically lower than the tax rate for C-Corps. You’re also not subject to Medicare and Social Security taxes.
- Single taxation. S-Corps are also only taxed once on the individual’s tax return, whereas C-Corps are double-taxed. Your distributions are also not double-taxed.
- Reduced taxable income benefit. You – the owner – can contribute to retirement accounts to reduce taxable income.
- QBID advantage. You can use QBID (Qualified Business Income Deduction).
Cons of Being an S-Corp
- Limited investor opportunities. You can’t accept foreign investors.
- No affiliates or subsidiaries. You can’t be owned by another business except in special circumstances.
- No funding rounds. You can’t have more than 100 shareholders.
- “Corporate veil” complications. As a more rigid corporate structure, you can’t use your personal accounts to pay for business expenses.
Not sold on the facts yet? You can also learn more about what owners’ compensation might look like for S-Corps.
Work With an Expert Who Knows Your Entity
70 percent of our clients are S-Corps, but it shouldn’t necessarily matter what your entity is. We can accommodate all kinds of businesses!
Now that you know that you can work with us regardless of your entity, how some clients come to us as S-Corps while we help others make the change, and why you may or may not want to be an S-Corp, are you ready to check out monthly accounting services?
If so, please consider CSI Accounting & Payroll! To see if we can be a good fit for your business, click the button below for a free consultation:
Not ready to talk? That’s okay! First, learn more about what it’s like to work with CSI by clicking the image below:
