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Related Articles

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.

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Published:  Thu, 12 Jul 2018 11:50:00 GMT



Edgemont incorporation vote up to state appellate court

Edgemont incorporation vote up to state appellate court A referendum on a bid to make Edgemont a separate village is now in the hands of a state appellate panel Check out this story on lohud.com: http...

Published:  Mon, 09 Jul 2018 03:02:00 GMT



Merger by incorporation of IMI Investimenti S.p.A. into Intesa Sanpaolo S.p.A.

The authorisation released by the European Central Bank for the merger by incorporation of IMI Investimenti S.p.A. into Intesa Sanpaolo S.p.A. (OTCPK:IITOF) was filed on 12 July, 2018 with the Turin C...

Published:  Thu, 12 Jul 2018 11:36:00 GMT



Organ-On-A-Chip Innovations Fueling Drug Screening Applications

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Town submits incorporation application

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Vote No on the Town of Hobe Sound incorporation

The area selected by the originators of the boundaries of the Town of Hobe Sound is made up of many diverse communities, each with its own individual flavor. From Hobe Hills to the southwest to the Sa...

Published:  Sat, 14 Jul 2018 01:16:00 GMT



Infibeam Incorporation Ltd is up for a third straight session in a row

The stock is quoting at Rs 153.1, up 1.69% on the day as on 12:49 IST on the NSE. Infibeam Incorporation Ltd is up 35.43% in last one year as compared to a 11.62% spurt in NIFTY and a 36.81% spurt in ...

Published:  Tue, 10 Jul 2018 00:46:00 GMT



Tax Insider Tip: Incorporation of a Property Business - The $64,000 question

We're now into year two of the four-year plan to reduce the amount of interest residential landlords can claim on their property lettings business. This phased approach is leading to higher taxes for ...

Published:  Thu, 12 Jul 2018 04:02:00 GMT



IoT Device Management Market is touching new levels - A comprehensive study segmented by Key Players: MICROSOFT, ORACLE, PTC INCORPORATION

HTF MI recently introduced Global IoT Device Management Market study with in-depth overview, describing about the Product / Industry Scope and elaborates market outlook and status to 2023. The market ...

Published:  Mon, 09 Jul 2018 02:54:00 GMT



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