What is an S corporation?
An S corporation is the election of a special tax designation which must be applied for and granted by the IRS to corporations that have already been formed. This election, in general allows for the income of the S corporation to be taxed to the shareholder of the corporation as opposed to the corporation per se. The primary advantage of an S corporation is the avoidance of double taxation. That is, the avoidance of payment of income tax on corporate net income, and then the payment of a further tax on the dividend income that is derived from the corporation. Thus, an S corporation allows certain income, deductions, and losses to be passed through the S corporation to the individual tax return of each shareholder.
The term S Corporation refers to the way in which the corporation is taxed. An S Corporation is a pass through entity. There is no corporate level income tax. Instead, a pro rata portion of the annual profit or loss of the S Corporation is included on the personal tax return of each shareholder. If IRS Form 2553 is filed within 75 days after incorporation, the corporation will be treated as an S Corporation for tax purposes. Many start-up businesses benefit by making the election to be taxed as an S Corporation. To learn about the characteristics of a S corporation, click here. To view a side-by-side comparison chart of the similarities and differences of S corporations, C corporations and LLCs, click here.
Subchapter S Corporation or “S” Corporation is similar to the “C” Corporation and operates primarily in the same manner. The main advantage associated with the “S” Corporation is that the income passes through to the shareholders, thus avoiding the double taxation of a “C” Corporation. However, the corporation must meet certain requirements to qualify for the “S” status under the current IRS rules. It also loses some of the tax deductions allowed to “C” Corporations. Advantages Limited liability protection avoids “double taxation” and has an unlimited life.
Most new corporations filed in the State of Georgia elect 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 have any ques
Most new corporations filed in the State of Florida elect 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). Florida 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 have any ques
What is an S corporation?