I want my business to be an S Class corporation, but I cannot figure out how deductions work! If I seed the money into the business account through stock sales, everything for the business must be purchased through this account, and the corporation does not get taxed - does this mean that an S Class corporation cannot deduct business expenses? Since all taxes for profits and losses are done through the shareholders (since these are passed onto them), and no one shareholder can claim the expenses, where do the deductions go? Also, as an S Class corp, does anyone know what percentage of profits and losses are passed on, and what is kept in the corporations business account to continue business?
When working as a Sole Proprietorship business, the deductions seem easy enough. But then there is the issue of what happens if (rather, when - I do eventually want to become an S Class corp to protect myself from lawsuits, even if I do not start out as one) I switch to S Class corp. Is it easy enough to switch it over, or does the hassle of doing so make it more convenient to just begin as one?
I would assume it is best to begin as an S Class corporation and avoid filing for changes with the IRS and my state. The only reason I am even thinking of starting as a Sole Proprietorship is that I want to begin my business right away, and it seems so easy to get started this way. Whereas, the corporation has many forms and many requirements to keep it safe during audits, and I want to take the time to be sure I complete everything correctly. There`s also the deductions confusion!
Thanks for any help you can provide me.