Electing S Corp status means that income generated by your business is “passed-through” to your shareholders for computing tax liability. Most businesses start out as a general C corporation and are required to pay income tax on taxable income generated by the corporation. However, as soon as a corporation has been formed, it may elect S Corporation status. Then, the shareholders are taxed like a partnership or sole proprietorship, and not the corporation.
A large majority of our small business customers meet the following S-Corporation requirements:
Be filed as a U.S. corporation
Maintain only one class of stock
Maintain a maximum of 100 shareholders
Be comprised solely of shareholders who are individuals, estates or certain qualified trusts, who consent in writing to the S Corporation election
All shareholders must have a US Social Security Number
Corporate fiscal year ends December 31st
Failure to observe any of the above requirements could revoke your S Corporation status at any time. Whether or not an S Corporation is something that you would benefit from is a decision that only you can make. Please consult your lawyer or CPA for details.
To qualify as an S corporation, a corporation must timely file IRS Form 2553 with the IRS. This election must be made by March 15 of the current year if the corporation is a calendar-year taxpayer in order for the election to take effect for the current tax year. However, a “New” corporation may make the filing at anytime during its tax year so long as the filing is made no later than 75 days after the corporation has began conducting business as a corporation, acquired assets, or has issued stock to shareholders (whichever is earlier).
Who should elect S Corporation status?
Owners who want the limited liability of a corporation and the “pass-through” tax-treatment of a partnership will often make the S Corporation election. In most cases, corporations that would benefit from S Corporation status are those who plan on distributing the majority of earnings to its shareholders in the year those earnings are derived. Corporations who plan on retaining earnings for future investments in future tax years often choose the C Corporation because under the S Corporation, earnings will be taxed as if they were distributed to shareholders regardless of whether a distribution actually occurred or whether the corporation retained the earnings for future investment.
In order to retain corporate existence, one must observe certain corporate formalities such as holding an annual meeting, taking corporate minutes, issuing shares and appointing officers.
Lawyers charge, on an average, over $200.00 per hour. With our document filing services, you know exactly what you need, what you are getting and how much it all costs from the very beginning.
You could file everything yourself, but when you consider the time needed to file, administer and maintain all the documents necessary to keep your business running legitimately, why would you? Rapid Document Services, Inc. offers you serious savings when it comes to your time and resources.
Once you decide to form your corporation, simply call us and we take care of the rest. Let us help you get it done, so you can get back to business! Incorporate with Rapid Document Services, Inc.