What is an S corporation?
An S corporation is a taxation election you can choose when you incorporate. It is not a completely separate form of corporate entity. The Tax Reform Act of 1986 increased the desirability of electing S corporation taxation status. Many small business owners elect S corporation status because it combines many of the advantages of sole proprietorships, partnerships, and corporate structures. S corporations have the same basic advantages and disadvantages of C corporations, but they have special tax provisions. In a standard C corporation, the profits are taxed at the corporate level by the federal government. When the profits are distributed to the shareholders as dividends, they are once again taxed as income to the individual shareholder. By electing S corporation status, a corporation does not pay taxes on its profits, and taxes are only paid when dividends are distributed to shareholders as personal income. Thus, by choosing to use an S corporation, a business owner can avoid the of
Standard business corporations or C corporations are required to pay income tax on taxable income generated by the corporation. Making a subchapter S election by completing and filing federal Form 2553 with the IRS is a way to avoid having your corporation treated as a separately taxable entity. An S corporation is a standard business corporation that has elected a special tax status with the IRS. This tax treatment allows the corporation not to be a separately taxable entity. Instead, the income of the corporation is treated like the income of a partnership, sole proprietorship and LLC; the income is “passed-through” to the shareholders. Thus, shareholder’s individual tax returns report the income or loss generated by an S corporation. However, unlike sole proprietorships, partnerships and LLC’s, the net profit of the S corporation is NOT taxed for self employment. You only pay self employment tax on the amount you withdrawal as a “salary”. The remaining profit can be distributed self
Just the opposite, S corporations, sometimes called small business corporations, are taxed as if they were not a corporation. Taxed like a partnership, an S corporation “passes through” its income or losses to the shareholder’s personal tax return, and is not liable for Federal income taxes itself. The shareholders of an S corporation will pay personal income taxes based on the income of the S corporation, whether or not the shareholder received any of the income. Conversely, the S corporation shareholders will be able to personally enjoy any losses the corporation may have. You need to discuss this with your CPA.
Standard business corporations or C corporations are required to pay income tax on taxable income generated by the corporation. Making a subchapter S election by completing and filing federal Form 2553 with the IRS is a way to avoid having your corporation treated as a separately taxable entity. An S corporation is a standard business corporation that has elected a special tax status with the IRS. This tax treatment allows the corporation not to be a separately taxable entity. Instead, the income of the corporation is 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. To be classified as an S corporation, a corporation must make a timely filing of Form 2553 to the IRS. This election must be made by March 15 if the corporation is a calendar year taxpayer, in order for the election to take effect for the current tax year. A
An S corporation is a corporation which has elected a special tax status with the IRS, which allows the corporation’s income to be treated like the income of a partnership or sole proprietorship, with the income “passed-through” to the stockholders, whose individual tax returns report the income or loss generated by the S corporation. To be an S corporation, a corporation must timely file Form 2553 with the IRS, generally within 75 days of incorporating. To be an S Corporation, a corporation must (at this time) have only one class of stock and less than 35 stockholders, who must be individuals, estates or certain qualified trusts, and consent in writing to the S corporation election.
What is an S corporation?