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S-Corporation
After a corporation has been formed, it may elect
"S-Corporation Status" by adopting an appropriate
resolution and completing and submitting
a form to the Internal Revenue Service (some states
require their own version). Once this filing is complete,
the corporation is taxed like a partnership or sole
proprietorship rather than a corporation. Thus, the
income is "passed-through" to the shareholders
for purposes of computing tax returns.
Most new small corporations elect S-Corporation
Status so profits and losses can be added to
the shareholders personal tax returns without having
to pay taxes on profits once, then again when they
are given back to the shareholders as income (dividends).
This is known as "double taxation" and is
the reason why S-Corporations were created. An S-Corporation
can also revert back to regular Corporation status fairly easily.
There are some limitations on S-Corporations: they
cannot deduct some expenses like health insurance,
travel,
entertainment, etc. that normal corporations can. Also,
they are restricted to 100 shareholders or fewer and
those shareholders must be U.S. Citizens.
Click here for Frequently
Asked Questions about Corporations
PROS: Prestige of the Corporation without
the double taxation. Ideal for "1 person
corporations".
CONS: More expensive to setup than a DBA; more paperwork and formality
required than an LLC (holding Shareholder/Board meetings, keeping minutes and
resolutions).
The Lowdown: Though taxed in a similar manner
to LLC's, still requires the corporate formalities of
a regular Corporation (holding Board meetings, keeping minutes and
resolutions).
How to Get Started: You
can start
right now. We
can form your Corporation in any of the 50 States
and D.C. We can also prepare
the IRS Form for your corporation to elect "S-Corporation
Status" as well as the required corporate resolution.

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