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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.

Angola: Minister Announces Incorporation of Optical Fiber in Aerial Communications

Angolan minister of Transport Ricardo D'Abreu announced Wednesday the inclusion of fiber optic cable in air navigation services, installation of digital radio and new security systems, as one of the ...

Published:  Thu, 02 Jul 2020 06:01:00 GMT



Firm completes report on Woodlands incorporation study for Township board

More than two years worth of intensive research, analysis and decisions on the potential incorporation of The Woodlands were compressed into a 319-page presentation and delivered to the township board ...

Published:  Fri, 19 Jun 2020 15:06:00 GMT



Bluetooth Headphones Market to Hold Revolutionary Growth Owing to Incorporation of Wireless Headsets With Smart Devices Till 2025 | Million Insights

The global Bluetooth Headphones Market size is projected to touch USD 17.5 billion by 2025, according to a new report by Million Insights. The market is expected to grow at a CAGR of 12.3% over the ...

Published:  Thu, 02 Jul 2020 01:47:00 GMT



Industrial Floor Mats Market 2020-2024 | Incorporation of Multiple Safety Features in Mats to Boost Growth | Technavio

Technavio has been monitoring the industrial floor mats market and it is poised to grow by USD 806.15 million during 2020-2024, progressing at a CAGR of over 4% during the forecast period. The report ...

Published:  Wed, 01 Jul 2020 05:20:00 GMT



Navarre incorporation effort fails to get enough signatures to get on August ballot

The effort to incorporate Navarre took a blow recently when the organizing group failed to get enough petitions to make it onto August primary ballot.

Published:  Mon, 22 Jun 2020 13:56:39 GMT



COVID-19 lockdown sees incorporation of 16,000 new companies: Report

Despite slowdown in overall business activity due to the coronavirus pandemic, close to 16,000 new companies have been registered since India's lockdown began on March 25. Of the 16,000 companies, ...

Published:  Wed, 24 Jun 2020 00:59:00 GMT



Nerve Stimulator Devices Market Expected to Grow at a CAGR of 12.6% by 2027|Cyberonics Incorporation, Boston Scientific Corporation

According to a recently published report by Research Nester on "Global Nerve Stimulator Device Market Outlook: ...

Published:  Sun, 21 Jun 2020 09:04:00 GMT



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