What is one major advantage of forming an S corporation?

One major advantage of forming an S corporation is the ability to avoid double taxation on corporate profits. In a standard C corporation, the corporation itself pays taxes on its earnings, and then shareholders are taxed again when those earnings are distributed as dividends. However, an S corporation is a pass-through entity for tax purposes, meaning that profits and losses are passed directly to the shareholders, who report this income on their personal tax returns. This keeps the business earnings from being taxed at both the corporate and individual levels, thus providing a significant tax benefit to shareholders.

The other options do not reflect advantages typically associated with an S corporation. Unlimited personal liability for shareholders would actually be a disadvantage since S corporations are designed to provide limited liability protection, separating the owner's personal assets from the business liabilities. The ability to raise funds through public donations does not apply to S corporations, as they are limited to a specific number of shareholders and types of shareholders, and cannot sell stock publicly. Lastly, S corporations generally face fewer regulatory requirements than C corporations, rather than increased ones. Thus, the option relating to avoiding double taxation stands out clearly as a key benefit of S corporation status.