Question:
Does an S Corporation protect your personal assets?

Answer:
Generally, yes, a corporation a will protect the business owner’s personal assets. The “S” in “S Corp,” is merely a way of designating the way in which the corporation will be taxed.

However, there are circumstances where people can come after the business owner personally, despite operating as an S Corp. They include:
• payment of payroll taxes
• payment of sales taxes
• failing to maintain certain corporate formalities — for example, not having a separate bank account for the business, not preparing annual minutes for the corporation, not issuing stock certificates, inadequate capitalization, and siphoning the assets from the corporation in a way that leaves it unable to pay its debts.

There are other entities (like an LLC) that can protect your assets, too – again, provided you follow the formalities, but asset protection is not the only reason to choose an entity. There are a myriad of other issues to consider – administrative burden, cost, tax implications, etc.