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but what is an s-corp?
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s-corporation
Getting your S-Corp is not hard. The question is, is the S-Corporation the right structure for your business?
Here are a few things to consider:
S-Corporations and nearly identical to C-Corps, but they’re designed for smaller businesses. Thus, the ‘S.’
Later, if needed, you can convert your S-Corp into a C-Corp.
The major difference between S-Corps and C-Corps is that of tax structure.
Pass-Through Tax Entity
S-Corps (like any kind of corp) are separate legal entities–meaning separate from yourself, though you may own or run the corporation.
As such, they typically receive a tax of their own.
Such is NOT the case with S-Corps.
Liability and Asset Protection
As with any corporation type, the s-corp provides the corporate shield, protecting your personal assets from danger if the business were to go south (not as in ‘south of the border’ as in ‘hotwater’ — and by ‘hotwater’ we mean ‘trouble’ and by trouble we mean… well, hopefully you get the point).
That’s that. Asset protection. Pretty simple.
Perpetual
Perpetual is a fancy word. It means, ‘continues on,’ or something like that. S-Corps (any types of corps) are perpetual in nature. They exist past the life of their owners. Because, as mentioned above, they’re separate legal entities.
Form 2553
By filing form 2553 you’re electing to be taxed as a pass-through entity.
This means that the entity itself (your S-Corp, or even your LLC, if your LLC elects to be taxed as an S-Corp) doesn’t have to pay income tax at the federal level.
Instead, the taxes “pass through” to the income received by the shareholders.
Advantages
– May reduce the self-employment tax burden on LLC members
– Assists C Corporations in avoiding double taxation
– Offers personal liability protection for business owners
– Maintains the administrative simplicity of LLCs
– Facilitates the transfer of ownership
– Supports the use of cash accounting methods
– Enhances the business’s credibility
Disadvantages
– S Corporations are limited to a maximum of 100 shareholders.
– Only eligible domestic corporations and LLCs can attain S Corp status.
– Partnerships, corporations, and non-resident aliens are not eligible.
– Subchapter S Corporations must use a calendar year for their tax year.
– Only one class of stock is permitted.
– Owners who perform significant work for a Subchapter S Corporation are classified as employees, leading to increased payroll responsibilities.
S Corp
Basic
Limited Access- ✓ State Wide Name Search
- ✓ 24 Hour Document Preparation
- ✓ File Articles of Incorporation
- ✓ Corporation ID Issuance
- ✓ File Statement of Information
- ✓ Free Corporate Reminders
- ✓ Prepare S Corp Election
- ✓ Corporate Bylaws
- ✓ Corporate Minutes
- ✓ Email all Docs and Forms
- ✓ 60 Day Registered Agent Service
- 🚫 Federal Tax ID or EIN Filing
- 🚫 Corporate Seal
- 🚫 Business Kit of Essential Forms
- 🚫 Custom Corporate Binder
- 🚫 Business License Package
Better
Unlimited Access- ✓ State Wide Name Search
- ✓ 24 Hour Document Preparation
- ✓ File Articles of Incorporation
- ✓ Corporation ID Issuance
- ✓ File Statement of Information
- ✓ Free Corporate Reminders
- ✓ Prepare S Corp Election
- ✓ Corporate Bylaws
- ✓ Corporate Minutes
- ✓ Email all Docs and Forms
- ✓ 1 year Registered Agent Service
- ✓ Federal Tax ID or EIN Filing
- ✓ Corporate Seal
- ✓ Business Kit of Essential Forms
- ✓ Custom Corporate Binder
- 🚫 Business License Package
Best
Unlimited Access- ✓ State Wide Name Search
- ✓ 24 Hour Document Preparation
- ✓ File Articles of Incorporation
- ✓ Corporation ID Issuance
- ✓ File Statement of Information
- ✓ Free Corporate Reminders
- ✓ Prepare S Corp Election
- ✓ Corporate Bylaws
- ✓ Corporate Minutes
- ✓ Email all Docs and Forms
- ✓ 1 Year Registered Agent Service
- ✓ Federal Tax ID or EIN Filing
- ✓ Corporate Seal
- ✓ Business Kit of Essential Forms
- ✓ Custom Corporate Binder
- ✓ Business License Package
How to Apply for S Corporation Status
1. Form an LLC or C Corporation:
Choose your business structure and file the necessary formation documents with the state. For an LLC, file Articles of Organization; for a C Corporation, file Articles of Incorporation.
2. File IRS Form 2553:
Submit IRS Form 2553 (Election by a Small Business Corporation) to request S Corporation tax status. This form must be filed within the IRS’s specified deadline, typically within 75 days of forming your business or the beginning of the tax year.
3. Complete State Requirements:
If your state offers S Corporation tax treatment, complete any additional state-required forms. Ensure compliance with all state-specific regulations for operating as an S Corporation.
S Corporations
– Taxes on Profits Only:
Shareholders are taxed solely on the profits they receive. Income is passed through directly to the owners, avoiding double taxation at both the corporate and shareholder levels.
– Shareholder Maximum:
S Corporations can have a maximum of 100 shareholders, all of whom must be U.S. citizens or residents.
– Only Common Stock Available:
S Corporation owners can only hold common stock, which includes voting rights.
C Corporations
– Taxes on Income and Profits:
Income is subject to double taxation—the business pays corporate income tax on its net income, and shareholders pay personal income tax on the profits they receive.
– No Shareholder Maximum:
There are no restrictions on the number or type of shareholders a C Corporation can have.
– Preferred Stock Available:
C Corporation owners can obtain preferred stock, which typically does not include voting rights but offers priority for dividends over common shareholders.
Why Choose CorpNation?
We take pride in offering a fast, reliable, and hassle-free experience for our customers.
Experienced
Founded by an Entrepreneur with decades of experience, Corpnation has helped thousands of businesses get their start.
Transparent
Here at Corpnation we’re dedicated to helping your business thrive. That means all upfront pricing, complete packages, and no bs.
Satisfaction Guaranteed
You take your business seriously, and so do we. That is why we provide a 100% satisfaction guarantee.
Still not sure if an S Corp is right for you?
Talk to one of our specialists to answer any specific questions.