An S corporation is a tax designation that allows corporations to avoid double taxation. This can be a major benefit for businesses, but there are eligibility requirements and other considerations to keep in mind.
Traditional C corporations pay corporate income tax on their profits, and then shareholders pay personal income tax on the dividends they receive from the corporation. This double taxation can significantly impact a company’s bottom line.
S corporations, however, are considered “pass-through entities” for tax purposes. The corporate profits or losses “pass through” directly to the shareholders’ personal tax returns, where they are taxed at the individual’s income tax rate. This eliminates double taxation and offers potential tax savings, especially for businesses with high profits and low reinvestment needs.
Tax Savings: The biggest perk S corporations are considered “pass-through entities” for tax purposes. Profits and losses “pass through” directly to shareholders’ personal tax returns, taxed at their individual income tax rate. This avoids double taxation, potentially saving a substantial amount on overall taxes, especially for businesses with high profits and low reinvestment needs.
Flexible Profit Distribution: Unlike C corporations with stricter profit distribution rules, S corporations offer more flexibility. Shareholders can receive profits based on factors like salary, ownership stake, or performance. This allows for strategic profit allocation based on your specific business needs.
Potentially More Attractive to Investors: For some investors, S corporations can be an appealing option due to the potential for lower overall taxes compared to C corporations. This can be a factor if you plan on raising capital in the future.
Eligibility Requirements: Not every corporation can be an S corp. There are limitations:
Number of Shareholders: Typically capped at 100 shareholders who must be U.S. citizens or permanent residents.
Shareholder Types: Restricted to individuals or certain trusts, disqualifying some potential investors.
Income Source: The corporation’s income must primarily come from business operations, not passive investments.
Stricter Regulations: Compared to LLCs, S corporations face more regulations.
These include limitations on:
Trusted
Experienced
Upfront Pricing
Satisfaction Guarantee
We can help you understand the differences between common business structures and choose the one that best suits your needs.
The required documents vary depending on your chosen entity and state. We will guide you through the process and ensure you have everything needed.
Turnaround times can vary depending on your state, but we typically process formations in as few as a few days.
We offer transparent flat-rate fees with no hidden costs. See our pricing page for details.
We take security and privacy very seriously. Our platform utilizes industry-leading security measures to safeguard your data. We also adhere to all data privacy regulations.
An EIN (Employer Identification Number) is like a social security number for your business. It’s required for various purposes like opening a bank account, filing taxes, and hiring employees. We can help you obtain your EIN quickly and easily.
A FinCEN report is required for certain types of businesses, such as money services businesses. We can advise you on FinCEN reporting requirements and assist with filing, if necessary.
Yes, we offer excellent customer support via phone, email, and live chat. Our friendly and knowledgeable team is always happy to help!
Don’t worry, we have a team of specialists to review your information and ensure everything is accurate.
Address: 1301 SW 80th TER
Plantation FL 33324
Phone: (305) 915-3533
Email: Support@efilingexperts.com
Business hours:
Mon-Sun 9AM to 9PM EST
Copyright © 2024 EFILING EXPERT- All Rights Reserved
Design & Developed by BRANDOME
