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What are the Main Differences between an LLC and an S-Corp?

What Is a C-Corporation?

What Is an LLC?

What Is an S-Corp?

Which Type of Company Incorporation is Right for You?

 

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What Is an S-Corp?

When you’re establishing a business – setting up for yourself, as they used to say – you have a number of tax and legal structures from which to choose. Among them are the sole proprietorship, the partnership, the limited liability corporation (LLC), the C-corp and the S-corp. Of these, the S-Corp is the sole choice that depends wholly on an Internal Revenue Service election. In fact, you can even choose S-Corp status for an LLC. But we’re getting ahead of ourselves.

What Is an S-Corp?
An S-corp is a corporation whose owners choose the IRS designation, “Subchapter S.” Choosing this designation allows you to sidestep federal corporate taxation. Instead, your shareholders declare company profits – or losses -- when they file their personal tax returns. If you, as the owner/shareholder, also work for the company, the IRS requires that you pay yourself a salary. If that agency determines that your salary is unreasonably low, while the company earnings you report on your tax return are high, you might get into hot water.

Becoming an S-Corp
As you might imagine, with such tax benefits to hand, you have to jump through some hoops to be eligible for Subchapter S designation. First of all, your company must be a corporation. Rules for corporate filing vary by state, but typically, corporate status requires filing articles of incorporation with the appropriate agency, usually the state secretary of state’s office. You may also need to file by-laws, to include the schedule for shareholder meetings. Other steps may also be required.

In addition, your company can have no more than 100 shareholders. A married couple – an owner and her husband, for example -- is treated as a single shareholder under IRS rules. You cannot have another corporation act as a shareholder if you want to claim S-corp status. A non-profit organization, on the other hand, is considered an eligible shareholder.

You’ll need to get a tax ID number from the IRS. This number identifies you to the agency and is the number your accountant will use when she files your business tax returns.

Moreover, each one of your shareholders must notify the IRS that he has chosen the Subchapter S designation for the company. Whether they work for the corporation or not, all must file IRS Form 2553.

Of course, you’ll also have to get the proper licenses and permits for your business. The U.S. government, your state, city and even county may each have a separate set of licensing regulations. Abide carefully by all the rules that apply to your business and its location.

Taxation
Some states are not as liberal as the federal government when it comes to S-corp taxation. Consequently, if you live in a state such as Massachusetts, you might have to pay state taxes on profits that exceed a certain limit. If your business is in New York or New Jersey, you’ll have to file a state corporate tax return just as any C-corporation would.

An S-corp is a corporate structure that offers significant tax advantages. Consult knowledgeable legal and tax professionals to determine if the Subchapter S designation is appropriate for your business.

Yearlong incorporation study kicks off in The Woodlands

The Woodlands Township leaders may decide by early next year whether to recommend that voters consider turning the community into a city, according to township board Chairman Gordy Bunch. Bunch wrote in an email that the two consulting groups are helping ...

Published:  Mon, 14 May 2018 05:51:00 GMT



Camp uses West Virginia's coal as creative tool

The creations fall under the umbrella of McArts Fine Arts Incorporation founded by Jean Battlo and three other artists in 1979. "I wanted to do something for McDowell, so I started McArts," she said. And now she serves as Artistic Director while working to ...

Published:  Sun, 20 May 2018 06:00:00 GMT



Baton Rouge Area Chamber voices opposition to St. George incorporation

The Baton Rouge Area Chamber board has voted to formally oppose the incorporation of the proposed city of St. George. BRAC and East Baton Rouge Parish Mayor-President Sharon Weston Broome had previously gone over St. George's budgets but expressed doubts ...

Published:  Tue, 15 May 2018 08:37:00 GMT



A Claim of priority Cannot Be Made With an Incorporation by Reference

For any patent family that has two or more patents applications, the claim of priority needs to be made correctly. Otherwise, intervening references may become prior art when they could be avoided. The "˜115 Patent was the last patent in a family ...

Published:  Fri, 11 May 2018 02:26:00 GMT



New charity receiving Poland Spring aid lacks federal nonprofit status

The activities council successfully filed articles of incorporation as a nonprofit organization with the Maine secretary of state's office on Jan. 18, according to an office spokeswoman, but it has not applied for nonprofit status with the Internal ...

Published:  Sun, 20 May 2018 10:58:00 GMT



Prospect Co., Ltd - Notice: Share Trading Unit Change and Partial Amendment to the Articles of Incorporation

Prospect Co., Ltd. (the "Company") `s Board of Directors has approved the share trading unit change and partial amendment to the Articles of Incorporation. Note 1. About share trading unit change A. Reason: To comply with "Action Plan for ...

Published:  Tue, 15 May 2018 04:59:00 GMT



Town board OKs incorporation services deal

TOWN OF BELOIT - Town of Beloit Board members gave their blessing to a intergovernmental services agreement between the proposed Village of Riverside and the remaining Town of Beloit. Officials say both entities would share police, fire and public works ...

Published:  Tue, 08 May 2018 07:41:00 GMT



Matoaka residents vote to end incorporation

MATOAKA - About two dozen voters decided Tuesday that a Mercer County town chartered more than 100 years ago would no longer continue to exist as an incorporated municipality. The town of Matoaka's streets were quiet Tuesday while the polls were open.

Published:  Tue, 08 May 2018 20:05:00 GMT



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