What is an S-Corp?
An S-Corp or S-corporation is a common small-business structure that allows for certain Tax advantages over C-Corps.
To be approved for the S-Corporation status there are certain requirements that need to be met:
- Must be a domestic corporation
- Have only allowable shareholders (Individuals, certain trust, states)
- Partnerships, corporations, or non-resident aliens cannot be shareholders.
- Must not have more than 100 shareholders
- Only one class stock
- NOT be certain ineligible institutions. (Certain financial institutions, insurance companies, and domestic international sales corporations)
To become an S-Corp, The corporation must submit Form 2553, Election by a Small Business Corporation signed by all the shareholders.
What Tax Advantages does it have?
LLC’s and S-Corp are both pass-through entities meaning that they don’t pay corporate taxes, and both offer limited liability protections for their owners. However, An S-Corp allows its shareholders to report the flow-through of income and losses on their personal tax returns, allowing S-corps shareholders avoid double employment taxation( Self-employment)