S Corporations
What is an S Corporation?
An S Corporation is a corporation formed in any of the 50 United States or Washington, D.C. whose stockholders properly make an election under Subchapter S of the Internal Revenue Code to be taxed as a partnership.
S Corporations receive many of the same benefits that a corporation receives (such as limited liability of shareholders) which has not elected to make an “S Corporation” election, while at the same time enjoying the tax benefits of a partnership.
S Corporations are tax “filers”, but generally not tax “payers” (other than in limited circumstances with respect to state taxes). Any taxes that are owed are paid at the stockholder level only, and not at the corporate level.
Can all corporations become an S Corporation?
No. In order for the stockholders of a corporation to make an S Corporation election, the following must be true:
- - The corporation must be incorporated in the United States.
- - The corporation must have only one class of stock (i.e. the entity may issue common stock, for example, with all of the same rights and privileges, but may not then issue another class of stock with different rights and privileges).
- - The corporation may not have more than 100 stockholders.
- - All stockholders of the corporation must be U.S. citizens or residents, and must be natural persons (and not entities, subject to limited special exceptions).
- - Profits and losses must be allocated to stockholders pro rata to each stockholder’s ownership interest in the corporation.
If a corporation satisfies these requirements and its stockholders wish to make an S corporation election, then such stockholders may complete and file IRS Form 2553, which must be signed by all of the company’s stockholders. In some cases, a stockholder’s spouse may also be required to sign the Form 2553.
A few states (New York and New Jersey) require a separate state-level S election in order for the corporation to be treated for state tax purposes as an S corporation.
How do I form an S-Corporation?
Filings Made Easy can help you form your S-Corporation. The process is fast and easy. Please click here www.FilingsMadeEasy.com/incorporate-online to get started (or email us at customerservice@FilingsMadeEasy.com or call us at 888-237-3410).
