S Corporations

S-corporations comprise one option that a business has when incorporating in Delaware. A designation as a "Subchapter S Corporation" can pave the way for big savings on federal income taxes. This designation is offered in Delaware, a state in which many of the largest and most successful companies in the United States are incorporated.

The key element of an S-Corporation is the "pass through" feature that is allowed by state laws. When one thinks of dollars coming into a corporation and being funneled to shareholders, one should envision a highway with two tolls. The money is taxed at the first toll when the companies receive it as income. The money is taxed again at the second toll, located at the shareholder level and involving dividends.

S-Corporations are a shortcut through the tax maze that allow one of the two tolls to be bypassed. The money coming into the corporation is "passed through" to the shareholders without taxation. Both corporations and shareholders can benefit financially from such an arrangement. One could even say that the corporations benefit twice--keeping shareholders happy is a key facet of success in business.

Setting up S-Corporations

Delaware state laws make the state a great location for incorporating, thanks to options like S-Corps. A business must be sure to declare itself a Subchapter S Corporation as soon as it can during the process of incorporation. Delays in submitting appropriate S-Corp information can lead to the loss of the opportunity to so incorporate.