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What is an S Corporation?
The two most common types of Corporations in the US are C Corporations and S Corporations.  The "C" and "S" are for subsections C and S of the IRS code respectively.  Most states impose a Corporate income tax on C Corporations.

After the C Corporation pays its Corporate income tax it can distribute some or all of profits to the shareholders (owners) of the C Corporation as specified in its Corporate Bylaws.  The shareholders then pay tax on the amount of profits which have been distributed to them.

An S Corporations is a C Corporation, or LLC, which elects to pass all Corporate income, losses, deductions, and credits through to their shareholders for federal income tax purposes.  Shareholders of an S Corporation report the "flow-through" of income and losses on their personal tax returns and are assessed tax at their individual income tax rates.

This allows an S Corporation to avoid the double taxation on its Corporate Income that a C Corporation has to pay.  S Corporations may be subject to other taxes levied on Corporations besides the Corporate Income Tax.  For example, some states have a Franchise Tax which is a tax on businesses for the privelege of conducting business in that state.

As in a C Corporation shareholders of corporate stock are the owners of the S Corporation.  Federal law alows a nontaxable Employee Stock Ownership Plan to hold stock in an S Corporation.  This gives shareholders a way to defer some of their taxes.  No tax is paid on these stocks until they are withdrawn from the Plan.

All Corporations start out as C Corporations.  In order to be treated as an S Corporation a form must be filed with the Federal government within 90 days of incorporation of the C Corporation. An S Corporation has some limits on ownership.  An S Corporation may be a better choice if you know that your Corporation will always be small and be owned by a small group of people.
Are there any restrictions on S Corporations?
An S Corporation has some limits on ownership.  An S Corporation may be a better choice if you know that your Corporation will always be small and be owned by a small group of people.

S Corporation constraints include:
  • All shareholders must be either US citizens or resident aliens, certain trusts, estates or organizations
  • Shareholders may not be partnerships, Corporations or non-resident aliens
  • Can have only one class of stock
  • Only common (not preferred) stock may be issued
S Corporations are required to hold director and shareholder meetings just like C Corporations.

You can get more specific S Corporation taxation information at the IRS web site.
How can I elect to be taxed as an S Corporation?
If you are ready to Elect to be taxed as an S Corporation now, simply fill in the
S Corporation Election Order Form below and click Place Order.
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