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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.

As special education population has grown, so has incorporation in regular classrooms

TUPELO "¢ Jack Martin, 12, was diagnosed with autism spectrum disorder at age three and was non-verbal until he was five years old. When he entered school, he started out in a self-contained special ...

Published:  Sun, 16 Jun 2019 02:00:00 GMT



Symphony Limited - Incorporation Of A Wholly Owned Subsidiary Company In Brazil

Get more of your favourite news delivered to your inbox SAIL's R&D Centre has already developed grades required for ... SAIL's R&D Centre has already developed grades required for ...

Published:  Sat, 15 Jun 2019 02:37:00 GMT



Southampton scuttles East Quogue's incorporation bid to handle land issues

Southampton Town officials have rejected efforts by East Quogue residents to incorporate their hamlet to better handle land issues because their petition included 34 dead people and lacked ...

Published:  Thu, 13 Jun 2019 16:20:00 GMT



Industrial Controls Market Trends by 2024: Top Players- ABB Ltd, Emerson Electric Company, Honeywell International Incorporation

This report studies the Industrial Controls market size (value and volume) by players, regions, product types and end industries, history data 2013-2018 and forecast data 2019-2024; This report also ...

Published:  Fri, 14 Jun 2019 08:42:00 GMT



Fincantieri and Naval Group Sign Joint Venture Agreement

France's Naval Group and Italy's Fincantieri signed a joint venture agreement on June 14 that delineated the terms of incorporation for a new 50/50 owned company. The companies signed an Alliance ...

Published:  Mon, 17 Jun 2019 14:20:00 GMT



Bridgewater Twp. opts to develop incorporation application

In an expected move, the Bridgewater Township Board of Supervisors on Wednesday unanimously opted to develop an incorporation petition. Approval does not mean the township will petition to become a ...

Published:  Thu, 13 Jun 2019 07:38:00 GMT



Digital Menu Boards for Restaurants: Installation Best Practices

One of the most popular "go-to" solutions in those niches is the incorporation of QSR menu boards. As with most digital signage, QSR menu boards appear quite simple on the surface. It seems that all ...

Published:  Mon, 17 Jun 2019 12:03:00 GMT



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