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Documents filed with the state forming your corporation
Personalized bylaws and resolutions defining who owns and manages the company
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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The basics to get you started
Preliminary corporation name clearance and filing of Articles of Incorporation.
Includes provisions that help protect directors and officers from liability.
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Frequently Asked Questions
S corporation- It have only one level of taxation and all their income is allocated to the shareholders.