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.