Dave gives Joe three instances in which it's a good idea to set up an S Corp for a small business.
ANSWER: The only benefit of setting up an S corporation is that you set up a corporate veil that will protect you from lawsuits. The S corp used to be the only way you could claim a tax deduction as a sole proprietor. Now you can claim the tax deduction without setting up an S corp. There is currently no tax advantage to an S corp.
The only times you should set up an S corp are:
• if you have substantial personal assets,
• your business is booming,
• or you have a business that lends itself to frivolous lawsuits.