What ia 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No tax is paid on these stocks until they are withdrawn from the Plan.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.
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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.
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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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We'll get your S Corporation Election Forms to you within 2 business days.
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S CORPORATION ELECTION ORDER FORM |
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This S Corporation Election Order Form is for existing Corporations or LLCs whcih are already registered with the Secretary of State or other state
department which is responsible for maintaing Corporate records.
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