S-Corporation

A subchapter "S" Corporation, also called an S Corporation, is a corporation that once incorporated, elects a special tax status. The Subchapter S tax election enables the shareholder to pass through earnings and profits directly to their personal tax return.If the corporation has a profit, the shareholder, if working for the company, must pay themselves wages that meet the standards of "reasonable compensation."

What are the main advantages of forming an S Corporation?

• An S Corporation is said to have less risk from government audits as a corporation (as opposed to sole proprietor or LLC)
• Owners of an S Corporation have limited personal liability for business debts
• With an S Corporation, owners can use corporate losses to offset income from other states.
• Owners of an S Corporation can save on employment taxes by taking distributions instead of salary.
• With an S Corporation, there is no double taxation threat because the corporation is not a separate taxable entity.

How to Form an S Corporation
In order to form an S Corporation, proceed with the filing of a regular C Corporation since the articles of incorporation that are filed with the state are the same for both the C Corporation and the S Corporation. After you receive all the paperwork back from the state, go ahead and fill out the IRS form 2553, Election by a Small Business Corporation, and submit the form to the IRS. This S Corporation form is included in the Corporation Complete Package.