What is an S corporation?
S Corporation is actually a Corporation what has obtained special tax status from the Internal Revenue Service (IRS). The Corporation must apply to obtain this special status within a certain frame of time after its incorporation. This tax treatment allows the corporation not to be a separately taxable entity. Instead of being imposed on the Corporation itself, the profits and losses are passed-through, for tax purposes, to Shareholders (as though they were partners). This helps to evade double taxation (at the corporate level and again at the personal level) and does not alter any of the legal protection, which a Company offers. In order to qualify for S corporation status, the corporation must be a U.S. corporation with only one class of stock and number of Shareholders is limited to 75. These shareholders must be individuals, estates or certain qualified trusts that consent in writing to the S corporation election. Shareholders are required to becitizens or residents of U.S. Also, a
An S corporation is a corporation that has elected a special tax status with the IRS. This tax treatment allows the income of the corporation to be treated like the income of a partnership or sole proprietorship; the income is “passed-through” to the shareholders. Thus, shareholder’s individual tax returns report the income or loss generated by an S corporation. By checking off this option on our incorporation order form 101incorporate can assist you in this election.
An S Corporation is merely a corporation which has elected a special tax status. This tax treatment permits the income of the corporation to be treated like the income of a partnership or sole proprietorship in that the income is “passed through” to the shareholders. Thus, shareholders report the income or loss which is generated by an S Corporation on their individual tax returns. Under these circumstances the “double taxation” potential is avoided. In order to be considered an S Corporation, the stockholders of a properly filed corporation must elect such status within 75 days of formation for the current tax year, or at any time during the preceding tax year. This election is made by filing Form 2553 with the IRS. To qualify for S Corporation status: • Must be a domestic corporation. • Only one class of stock. • Not more than 35 stockholders. • Stockholders must be individuals, estates or certain trusts.
An S-Corporation is not a business structure, but is a type of “tax status” that an existing corporation may choose to elect. Closely-held corporations may elect to be taxed as federal or state S-Corporations (IRC 1361-1379), which permit shareholders to pay taxes on corporate net income personally, as if it were a partnership. S-Corporation status is limited to corporations that have a certain limited number of shareholders. The percentage of income the corporation can derive from passive investments is also restricted.
An S Corporation is simply a C Corporation (also known as a standard business corporation) that files IRS form 2553 to elect a special tax status with the IRS. The same filing procedure is used for both types of businesses within the State. However, an S-Corporation must file an additional tax form that will give the S-corporation a special tax status with the IRS. This special tax status enables S-corporations to avoid paying corporate income tax. C-corporations must pay corporate income tax.
What is an S corporation?