more information
- incorporating a new business
- Corporation
- S Corporation
- Limited Liability Company
- Limited Partnership
- General Partnership
- Limited Liability Partnership
- Limited Liability ltd partnership
- Non-profit 501 (c) (3)
- sole propreitorship
- Revocable living trust
- Contact Us
- Get Started Now
- Incorporate Now
- Bookstore
- Limited Liability Company
- Limited Partnership
- Limited Liability Partnership
- Limited Liability Limited Partnership
- Non-Profit
- Corporation
|
|
How to Incorporate - S Corporation
All corporations begin as a C corporation, but may elect S status with the IRS. C and S corporations are distinguished by how their income is reported.
Advantages
- Combines the limited liability with pass-through tax treatment-allowing business income and loss benefits to flow directly to shareholders, which eliminates the possibility of double taxation on business profits.
- Retirement plans aren't just for big businesses; they are available for even a one-person sole proprietorship.
- You can set up a tax-advantaged retirement plan for yourself and your employees. There are quite a few retirement plan options.
Disadvantages
- Must meet certain eligibility requirements such as
- It is a U.S. corporation with no more than 100 shareholders. This eliminates public corporations. (A husband and wife are considered one shareholder if they own their stock jointly.)
- All shareholders are individual U.S. citizens or resident aliens.
- Corporation has only one “class” of stock. There can’t be any preferred or other types of shares that give special privilege to some shareholders-for example, one class of stock with voting rights and another without.
- Cannot own 80% or more of the shares of stock in another corporation.
- All shareholders must consent in writing to S corporation status by signing Form 2553, which is filed with the IRS.
- No Retained Earnings allowed.
- Tax issues when converting from a C corporation to an S.
Tax Implications
- Files U.S. Corporation Income Tax Form 1120-S for every year of its operation whether or not it has any income. Typically, the tax year is the calendar year, so the return is due on March 15.
- Individual S corporation shareholders report the business’s income (or loss) on their individual tax return.