Hybrid company with characteristics of regular Corporation and LLC. Owners must be citizens or residents.
The company pays no taxes at the Corporate level. Perfect type of company if you are small businesses an plan run payroll. Just like LLCs, the owners of an S Corporation are usually not personally responsible for business debts. By default, a corporation is not considered a S-corp, if desired you can apply for small business election(s-corp). As an S-Corp the business does not suffer from double taxation. The company pays no federal taxes at the corporate level and so you will pay personal taxes on the income. If you do you want S(small business) status you have 75 days after your company is created to apply for S-corp tax treatment.
Advantages:
S Corporations is considered a Pass-through taxation entity, profits taxed at the owner’s level, not at the S-corp level (no double taxation).
S Corporations are attractive to small business at it make it so not all income is subject to self-employment income.
Protection to owners from liabilities for the debts of the business.
Have much less administrative paperwork and record keeping.
Disvantages:
Foreigners and other companies can not be an owner of an S-Corp.
There cannot be more than 100 shareholders.
Rigid Profit and Loss Allocation.
There can only be one class of stock, this is not attractive to investors.
Commonly Asked Questions on Forming an S-Corp
If you have any questions about registering an S Corporation give us a call or send us an email.
The process of registration normally takes from 1-2 weeks in most States.
Foreigners and other companies can own it.
The formation of the S Corporation can be done all Online.
After your company is approved the next step is to apply for an EIN.
Only in a few cases will you received a physical document as in most states the documents are delivered electronically.
You do not have to immediately start operating your business.
Once open the S Corporation, it can be closed at any time.
Federal Income tax returns are not filed with the IRS until the next year.
You do not to have to hire employees.
A S Corporation can be formed with only one owner.
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