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S-Corporation 2017-11-24T10:58:35+00:00

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What is a S corporation?

S corporation is just a sub chapter of corporation which meets specific Internal Revenue Code requirement giving a corporation with 100 shareholders or less the benefit of incorporation while being taxed as partnership.
Such corporations have elected a special tax status with the IRS. Corporation like S corporation provides provide the same limited liability to owners (called shareholders) as C corporations, meaning that owners typically are not personally responsible for business debt and liabilities; however, S corporations have pass-through taxation. They do not pay tax the business level. They file an informational tax return but business income or loss is reported on the owner’s personal tax returns, and many tax due is paid at the individual level.

Advantages of S corporation

  • Owners with small business form a corporation and elect S corp status for pass-through taxation.
  • In S corp business, Owners are not generally responsible for the debts and liabilities.
  • It is easy to transfer ownership through the sale of stock.
  • By selling the share of stocks, you can easily raise additional capital.
  • Since owners who work for the business are classified as employees, an S corp can offer self-employment tax savings.
  • Tax deductible business expenses.
  • S corps passes income and loss through shareholders. Similarly, the income and losses for partnership are passed by partners.

Disadvantages of S corporation

  • Owners or employees who holding 2% or more of the company’s shares cannot received tax-free benefits.
  • High-Income shareholders will pay more taxes on their distributions because flow-through taxes are paid at the personal rate.
  • One class of stock only
  • 100 shareholders maximum is allowed with the condition that all of whom must be U.S. residents or resident aliens. Except some special circumstances, shares must be held directly.

How to apply for S Corporation

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In no time, you will receive your Limited Liability company package by mail.

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Economy

$149

The basics to get you started

Preliminary corporation name clearance and filing of Articles of Incorporation.


Personalized bylaws

Includes provisions that help protect directors and officers from liability.


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Standard

$239

Everything from Economy +


Deluxe incorporation kit

All of your documents organized in a custom-embossed binder


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$199

Everything from Standard +


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Expedited review and printing in 2 business days.


2-day delivery

Once documents are ready, we’ll ship your final package for arrival on the second business day.


$30 off your federal tax ID


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Frequently Asked Questions

C corporation- It is subjects to double taxation which means that one tax at the corporate level on the corporation’s net income and another tax to the shareholders when the profits are distributed.
S corporation- It have only one level of taxation and all their income is allocated to the shareholders.
Shareholders are taxed upon their allocated share to the income that means corporation itself is not subjected to federal income tax. Self-employment tax is not paid by shareholders on their share of an S corp profits.
LLC’s as well as new corporations cond considering corporate taxation can choose between filing taxes as a C corporation (“C corp”) or an S corporation (“S corp”). An S corp is considered a “pass-through entity,” which means the business itself isn’t taxed. Instead, income is reported on the owners’ personal tax returns.
Both the S-corporation and LLC pass through tax entities. S- corp must file a business tax return, LLC’s only file business tax returns if the LLC has more than one owner. NO income taxes are paid with pass through taxaxtion at business level. Profit or loss in business is passed through to owners’ personal tax returns.
You only just pay self-employment taxes on earned income Example- At the time of tax, marry pays $30,000 a year in earned income as an employee, and $10,000 in S corp distributions as a shareholder. She also must pay federal and local income taxes.
If once a business has incorporated in usual way and has filed its articles of incorporation, it can elect S corporation status by filling form 2553 with IRS (Internal Revenue Service). All the shareholders of the corporation must sign form or file special shareholder consent forms.