Create an S Corporation Business

S-CORP Products: Approximately 5% of clients choose to form an S Corp. A corporation or LLC can elect to be taxed as an S corporation.  An S corporation is an ordinary business formed and operated under a state’s general corporation laws. Forming an S corporation may be ideal for businesses that are engaged in a service or trade.

Corporation Advantages and Disadvantages:

1. Advantages - S corporations, unlike C corporations, do not pay federal income taxes. Like partnerships and LLCs, S corporations are generally treated as a flow-through entity where income, deductions, and tax credits flow through to the shareholders on an individual level, not the corporate level. S corporations may also save money on self-employment taxes.
2. Disadvantages – The primary disadvantages of S corporations are higher administrative costs and rigid operating structure, especially with respect to shareholder distributions. S corporations have lost favor with the advent of the modern LLC.

General Requirements of Formation

1. A Federal Tax ID number (EIN) is required.
2. To qualify for an S corporation, the company must:
   • Be a “domestic” corporation or organized in the United States or under federal or state law;
   • Have only allowable shareholders:
     • May generally be individuals, certain trusts, and estates;
     • May not generally be partnerships, corporations, or non-resident alien shareholders;
   • Have no more than 100 shareholders;
   • Have only have one class of stock; and
   • Not be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations).
3. All shareholders must consent to S corporation status.
4. Finally, the company must file Form 2553, “Election by a Small Business Corporation,” to indicate it elects S corporation status.

-Select State Below To View Specific S-Corporation Formation Requirements-