As an S corporation owner, you can avoid the double taxation that plagues income earned by a regular C corporation. Instead of being taxed twice—once on the corporation level and once personally—income flows through to the S corporation shareholders. So, it's only taxed once at your personal level.
For that reason, it makes sense to keep your salary as low as possible to minimize payroll taxes. But don't stop there.
Strategy: Transfer shares of the S corporation stock to your children. By doing that, some income is taxed to your children in their low tax brackets instead of your higher bracket.
If you follow the tax-law guidelines, you won't owe any tax on the transfers.
Example: Share the wealth
Say you're an S corporation employee-shareholder. The only other shareholder is your spouse, who doesn't work for the company. Your two children are in their late teens.
This year, your S corporation expec...(register to read more)