An S corporation is an attractive option for small business owners. One of its reasons is that its tax benefits are more appealing than the C corporations. It also provides owners liability protection of a corporation. Deciding to be an S corporation allows you to pass the company’s income and losses through to shareholders. For that reason, you will only have to deal with the federal tax.

However, your cooperation has to be eligible for an S corporation election. Some of the requirements to qualify for S corporation status include:

  • Must be a domestic corporation.
  • The shareholders must not be more than 100 in number.
  • Shareholders must be individuals, certain trusts and estates and cannot be partnerships, other corporations or non-resident alien shareholders.
  • Cannot have more than 100 shareholders.
  • Must only have one class of stock.

When Should It be Filed?

Filing of S Corporation election should not be more than 60 days and 15 days after the start of the tax year that the election will take effect. In other words, it has to be the first year of the business. So, if your business started on the 7th of January, you must file the S Corporation election not later than March 15. Failure to submit means that you will not receive the S status for the said tax year.

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How Much is the Fee of Filing an S Corporation Election?

You do not have to pay anything when you file an S Corporation Election. Even though there is no fee to pay to the IRS, you should consider retaining an attorney who will do the paperwork. In this way, you can be sure that all of the necessary documents are properly filed.

Business Structure

Some business owners have trouble in making a choice between the LLCs and S corporations. The reason for this is that both of them possess similarities, but they also have some differences. As previously mentioned, an S corporation cannot have more than 100 members or shareholders. The LLC, on the other hand, can have unlimited owners. An LLC can have foreign investors and LLCs are also more flexible in sharing profits than the S corporation.


Are you Ready to Form an S Corporation?

Should you decide for an S corporation, you may contact our attorneys at Enterprise Consultants Group. Our tax professionals have been in business for decades. Contact us today for an initial consultation. If you have further questions about S corporation election, please do not hesitate to call our tax lawyers at (800) 575-9284.