What is an S-Corp?

What is an S-Corp? | Tax Advantages of S-Corporation

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.

Tax Advantages of S-Corporation

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)

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