Business Structure: S Corporation

  Introduction

An S corporation is a corporation created under state law that elects to be treated as a pass-through entity (like a sole proprietorship or partnership) for tax purposes. Since all corporate income is "passed through" directly to the shareholders who include the income on their individual tax returns, S corporations are not subject to double taxation. Moreover, the accounting for an S corporation is generally easier than for a C corporation.

S corporation formation requires filing with the appropriate state agency as well as a filing fee just like a C corporation. In addition an additional tax election form must be completed to designate the subchapter S status.

  Advantages

  • Special tax election allows pass through taxation directly to shareholders and the avoidance of "double taxation"
  • Accounting for an S corporation is generally easier than for a C corporation
  • Enjoys the same level of liability protection as a C corporation
  • Enjoys many of the same benefits of a C corporation

  Disadvantages

  • More expensive to form and maintain than sole proprietorships and partnerships
  • Have many of the same rigorous ongoing business requirements as does a C corporation
  • Several restrictions that are specific to S corporations including
    • Limit of 100 shareholders
    • Shareholders must be US citizens or legal residents
    • Only permitted to have one type of stock
    • Limits on types of income (e.g. passive income from real estate, royalties etc.)


 

Our U.S. Incorporation Services

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We provide full service of forming your company, which includes everything from drafting and filing the Articles with the state for your choice, providing registered agent in any of the 50 state and DC, obtaining EIN for non-US owners, drafting Operating Agreement, obtaining all necessary licenses and tax IDs, certifying your company documents for foreign use, and more.

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