What is an S corporation?
An S Corporation is a special form of corporation (Note: The “S” in S Corporation refers to sub chapter S of the tax code). S Corporations are based on C Corporations but they are not treated as a separate tax entity as C Corporations are. Instead, the income of an S Corporation is “passed through” to the personal income of its owners (shareholders) in proportion to their ownership interest. An S Corporation is created by forming a traditional C Corporation and then filing the IRS Form 2553 (The Subchapter S Election) for federal recognition of S Corporation tax status. While the S Corporation has many of the same features as a C Corporation, there are some important differences. Note: While the S Corporation features similar pass through taxation to an LLC, in the area of self-employment taxes an S Corporation can have an advantage over an LLC. The compensation (salary and bonuses) of S Corporation shareholders is subject to self-employment tax, but not on the profits automatically al
An “S” corporation is essentially the same as a “C” corporation, but it has chosen a special tax status with the Internal Revenue Service. They both have shares of stock, directors and shareholders. The special tax status allows the “S” corporation to pass through the profit or loss to it’s shareholders. This eliminates the issue of double taxation. Not all states recognize the “S” status, but the majority does. To obtain the “S” status the corporation must file form 2553 with the Internal Revenue Service and have to make a similar election with some states.
An S-Corporation is a corporation that has successfully applied to be taxed under subchapter S of the federal Internal Revenue Code. This means that the corporation will be taxed similar to a partnership where the corporation does not pay income tax. Instead, the income will pass through to the shareholders and the shareholders must report the corporate income on their personal tax returns. Back to Articles of Incorporation.
An S-Corporation is a C-Corporation that has elected a special tax treatment with the IRS. Normally C-corporations pay corporate income tax on the income they generate, the remainder of the after tax income is then distributed to the shareholders as dividend, the dividend is then taxed as personal income to the shareholders. This situation is referred to as double taxation, S-corporations address this issue by avoiding the corporate income tax on the income that the corporation generates. In other words the income an S-Corporation generates is not taxed. Instead the income flows directly to the shareholders (owners) income tax returns and is taxed there as personal income.
A S-corporation is a corporation that has elected a special tax status with the IRS. The subchapter “S” election allows the income of the corporation to be treated like income in a sole proprietorship or partnership. This means that S-corporation income is “passed through” to the shareholders, avoiding “double taxation” on corporate profits, and individual shareholder income. To elect S-corporation status, the shareholders of a properly formed corporation must apply for “S” status within 75 days of formation. In addition, S-corporations must have only one class of stock, must have no more than 75 shareholders, and the shareholders must be individuals in most cases. Other online incorporation services charge up to $85.00 to prepare the forms to elect S-corporation status. The completed IRS forms to elect S status is included with the yourFloridaCorporation.com package. Back to top.
What is an S corporation?