What is a S Corporation
What is a S Corporation?

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What is a S Corporation?

An S Corporation is a small business Corporation whose shareholders have made a choice to be taxed under personal income tax law rather than Corporation law.

An S Corporation is not treated as a separate taxable entitiy like a C Corporation. The S is for Chapter S of the IRS code.

No Corporate income tax is paid to the IRS for an S Corporation. For tax purposes net income is "passed through" the S Corporation to the personal income tax of the shareholders. With an S Corporation double taxation (paying both corporate and personal taxes) can be avoided while retaining all the legal protections of a C Corporation.

In addition, federal law allows 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 No tax is paid on these stocks until they are withdrawn from the Plan.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 a C Corporation. In order to be treated as an S Corporation a form must be filed with the Federal government within 75 days of incorporation of the C Corporation, or within 75 days of a new year.

S Corporation eligibility requirements include:
  • Less than 75 shareholders
  • All shareholders must be either US citizens or resident aliens, certain trusts, estates or organizations
  • Business entities and non-resident aliens may not be shareholders
  • Only common (not preferred) stock may be issued
  • The end of the fiscal year must be Dec. 31 S
An S Corporation is required to hold corporate and shareholder meetings just like a C Corporation. An S Corporation is required to pay taxes only once a year (vs. quarterly for a C Corporation).

45 states accept a Federal S Corporation election if the Corporation has filed a valid IRS S Corporation Election form. In Arkansas, New Jersey, New York, Ohio, and Wisconsin, a separate state S Corporation election must be made.
CORPORATE GLOSSARY
 
Administrative Dissolution
Agent for Service of Process
Apostille
Apportionment
Articles of Incorporation
Articles of Organization
Assumed Name
At Will LLC
Authorized Shares
B Corporation
Benefit Corporation
Board of Directors
Business Dissolution
Business Entity
Bylaws
Certificate of Existence
Certificate of Status
Certified Copy
Close Corporation
Common Stock
Conversion
Corporate Bylaws
Corporate Name Reservation
Corporate Stock
DBA
Disregarded Entity
Dividends
ESOP
Excise Tax
Federal Tax ID
Ficticious Name
Foreign Qualification
Franchise Tax
General Partnership
Good Standing Certificate
Incorporator
Involuntary Dissolution
IRS Form 966
ITIN
Limited Liability Company
Limited Partnership
Liquidation
LLC
LP
Majority Shareholder
Meetings
Merger
Nexus
Non-Stock Corporation
Nonprofit Corporation
Obligated Member LLC
Organizer
Paid-in Capital
Paid-in Surplus
Par Value
Personal Service Corporation
Preferred Stock
Privilege Tax
Professional Corporation
Professional Service
Proxy
Registered Agent
Registered Office
Reporting Requirements
Revocation
S Corporation
Series LLC
Service Mark
Shareholder
Sole Proprietor
Stated Capital
Statutory Agent
Stock Certificate
Term LLC
Trade Name
Trademark
Trust
Trustee
Winding Up
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