What is an S corporation?
An S corporation is a corporation that has elected to be taxed as a flow though entity (similar to an LLC or LP). The “S” also refers to an IRS code section. Providing for this type of taxation, the S election allows the shareholders to be taxed only at the individual level instead of at both the corporate and individual level, thus avoiding the double taxation like the C corporation. The S corporation still provides limited liability protection and is a good entity for many business situations.
An S corporation is one that has made an election with the IRS under subchapter S of the Internal Revenue Code to be treated for tax purposes as a pass-through entity meaning that profits and losses of the corporation are passed through to the shareholders (owners) who report them on their personal tax returns and pay the tax at the individual level. The corporation pays no federal income tax at the corporation level.
An LLC can choose to be taxed as a corporation and then choose the S corporation status.. An S corporation is a corporation that has elected a special tax status. This tax treatment permits the income of the corporation to be “passed through” to the shareholders. Thus, shareholders report the income or loss which is generated by an S corporation on their individual tax returns. 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 Internal Revenue Service (IRS). Georgia Incorporation Service can take care of this filing for you during your registration for $39. To qualify for S corporation status, the corporation must be a domestic corporation; have only one class of stock; and, have not more than 100 stockholders, who must be individuals, estates or certain trusts. If you hav
The main advantage of having an S Corporation is avoidance of double taxation. This can be done by electing a special tax status with the IRS. Having this tax status permits the income of the corporation to be “passed through” to the shareholders. The shareholders report the income or loss which is generated by their S Corporation on their individual tax returns. The form required for this election is Form 2553 and is filed with the Internal Revenue Service (IRS). In addition, to qualify for this status, each stockholder must be a citizen or resident of the United States, estate or qualifying trust of such person. They can only have one class of stock, they must not have more than 100 stockholders and each must consent. They corporation must also use the calendar year as its fiscal year. If the corporation can demonstrate to the IRS that another fiscal year satisfies a business purpose then sometimes they will permit a different fiscal year.
What is an S corporation?