S-CORPORATION
Sub Chapter S Corporation
|
S-Corporation Formation Only $69.00+State Filing Fees |
|
|
What
is the S-Corporation?
Generally,
an S corporation does not pay income tax; however, its income,
deductions and credits are passed through to its shareholders.
The shareholders of an ‘S’ corporation on their tax
returns include their share of the corporation's separately stated
items of income, deduction, loss, and credit, and their share
of income or loss in the business. A ‘S’ corporation
must file Form 1120-S, tax return for an s corporation if:
-
it
elected to be an S corporation by filing Election by a Small
Business Corporation
-
the
IRS accepted the election, and
-
the
election remains in effect
Advantages:
Double taxation is avoided
Double taxation occurs when a corporation pays income tax on corporate
net income, and then the shareholders pay tax on any dividend
income they receive from the corporation (This often occurs with
C corporations). Double taxation hits particularly hard when a
company is sold.
By
becoming an S corporation, profits and losses flow directly through
to the owners in proportion to their ownership percentages. For
example, a 10% owner would receive 10% of the profits or losses.
Since
profits and losses flow through and are taxed on the individual,
there is no federal tax on the corporation itself. California
does tax S corporations on the corporate level, but at much lower
rates than C corporations. The remaining income flows through
to the shareholders for a second layer of California taxation.
Advantages:
Avoidance of self-employment tax by the shareholder of the corporation:
Sole proprietors and independent contractors are subject to self-employment
tax at a rate of over 15%. A self-employed person who forms an
S corporation and becomes an employee of that corporation is no
longer subject to self-employment tax because that person will
no longer be self-employed. This applies even if that person is
the corporation's sole shareholder and employee.
However,
reasonable wages are required to be paid to the shareholder/employee
and payroll taxes must be paid on this amount.
The profits of an S-Corporation automatically pass to the shareholders
of the corporation each year. This means that any income earned
by the corporation is automatically passed to its owners and included
as taxable income for the shareholders. Most owners of corporations
choose to file for S-Corp status to avoid the possibility of double
taxation. A S-Corp must have fewer than 100 shareholders to qualify
as a S-Corporation.
Most
small business owners naturally will avoid double taxation by
paying out income in the form of salary and bonuses. Both salary
and bonuses, and any other form of employee compensation, are
direct reductions from the net income of the corporation, hence
taxing the owner only once, at the individual level.
Ready
to incorporate:
To
Incorporate, proper formation documents, called the articles of
incorporation or certificate of incorporation, must be filed with
the appropriate state, agency and the necessary state filing fees.
We will prepare, complete and file these administrative tasks
quickly and effectively, all you need to do is complete our simple
order form.
| |
|
|
Order by Phone: |
|
Order by Fax: |
|
1-866-754-4460 |
|
|
To download form you need Adobe Reader. Click on the icon to download your free copy. |
|
