Even if you are a shareholder and own a S corporation, you are still regarded as one of the company’s employees. You have the right to a fair wage as an employee for the work you do for the company. Payroll taxes are due on this salary just like they are for any other employee. However, you are also eligible to receive distributions from the corporation as a shareholder, which are exempt from payroll taxes.
Since a corporation is a distinct legal entity from its owners, owning one does not qualify as being self-employed. However, if you offer services to the company, you can be regarded as an employee and be required to pay payroll taxes. Can You Form Your Own Corporation?
Technically speaking, you cannot incorporate yourself. Legal entities like corporations have to be established in accordance with state regulations. However, you can establish a corporation as a person and serve as its single shareholder, director, and officer. This type of business is called a “one-person corporation.”
Although hiring a lawyer is not legally necessary to incorporate in Canada, it is highly advised. A lawyer can ensure that you comply with all legal requirements and steer clear of any potential troubles down the line because incorporating entails complicated legal and tax considerations. A lawyer can also help you manage any legal concerns that come up throughout the incorporation process and advise you on the optimal corporate structure for your firm.
Corporations have a number of drawbacks, such as restricted liability that encourages irresponsibility on the part of the individual, complicated legal requirements and regulations, the possibility of conflicts of interest between shareholders and management, and the possibility of corporate avarice and unethical behavior. The environment and society may suffer as a result of firms prioritizing profits over social responsibility and sustainability.