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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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TopConsumerReviews.com provides unique articles that you won't find anywhere else on the internet. These articles are designed to help you make the most informed decisions possible.

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.

Meeting Preview: Woodlands board to tackle incorporation issues at Thursday meeting

The newly re-elected quartet of incumbents on The Woodlands Township Board of Directors were sworn in for their new two-year terms on Wednesday night, Nov. 28, by Precinct 3 Justice of the Peace Edie ...

Published:  Wed, 20 Mar 2019 14:25:00 GMT



Images Associated with the 1799 Town Incorporation Celebration

Wood Tavern (site of the Town Incorporation Celebration , March 18, 1799) .. razed in 1959. (J.E. Fogelberg Collection ) Wood Tavern (site of the Town Incorporation Celebration , March 18, 1799) .

Published:  Tue, 19 Mar 2019 15:02:00 GMT



Chair: Town's incorporation effort could hinge on agreement with city

BELOIT - Incorporation may not be in the Town of Beloit's best interests if the town can strike a deal on key issues with the City of Beloit, town chair Diane Greenlee said. "I've always been for ...

Published:  Fri, 22 Mar 2019 07:56:00 GMT



Metro briefs: Dakota County Board rejects study of South St. Paul library merger

The Dakota County Board has decided against studying the possible incorporation of the South St. Paul library into the county library system. "I know it's only a study, but "¦ I don't know anything ...

Published:  Sat, 23 Mar 2019 11:58:00 GMT



James Island incorporation bill has support and critics

CHARLESTON, SC (WCSC) - An old argument is back on the table in the South Carolina State House. Representative Peter McCoy's HB 3661 would allow unincorporated areas of James Island to rejoin the town ...

Published:  Wed, 20 Mar 2019 09:50:00 GMT



Good news for start-ups: Incorporation norms relaxed - Details here

To boost ease of doing business, especially for small and medium enterprises (SMEs) and start-ups, the ministry of corporate affairs (MCA) has exempted incorporation fee for firms having share capital ...

Published:  Fri, 22 Mar 2019 15:42:00 GMT



Community leaders look at results of Skidaway Island incorporation vote

CHATHAM COUNTY, GA (WTOC) - On Tuesday, voters from our area headed to the polls for the 2019 Special Election. Voters on Skidaway Island decided for the island to remain a part of unincorporated ...

Published:  Wed, 20 Mar 2019 15:23:00 GMT



Navarre incorporation effort hits roadblock; county wants petition drive before considering referendum

Navarre incorporation effort hits roadblock; county wants petition drive before considering referendum Santa Rosa County leaders want more information before voting to approve or deny a referendum to ...

Published:  Mon, 11 Mar 2019 10:26:00 GMT



Skidaway Island votes down Incorporation proposal

Skidaway Island voters had their chance to become their own city on Tuesday, but the majority of them said "no thanks". The incorporation proposal was shot down by an overwhelming margin of 3,656 ...

Published:  Tue, 19 Mar 2019 18:05:00 GMT



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