S Corporation info

S-Corporation Information & FAQs

What is an S-Corporation?

An S-Corporation is simply a C-Corporation that has elected to be treated as a pass through entity in order to avoid double taxation. An S-Corp is still a separate and distinct legal entity from it’s owners and conducts business under it’s own name. When operated and maintained properly the owners (shareholders) of an S-Corp can not be held personally liable for it’s debts and liabilities. This means that the shareholders personal assets are protected and they will not be required to settle any corporate debt or court judgments against the corporation with their own money.

Pass Through Taxation

S-Corps offer owners (shareholders) the same personal liability protection as that of a C-Corp with advantage of pass through taxation similar to that of sole proprietorship. An S-Corps income or loss is passed directly to the owners and is reported on their personal tax returns.

Restrictions Placed on S-Corps

While they do benefit from pass through taxation there are restrictions placed ownership. S-Corps are restricted to one class of stock and can not have more than 100 shareholders. Shareholders are also required to be US citizens or legal residents of the US. Additionally, S-Corps must use the calendar year as their fiscal year except under special circumstances.

How does a corporation elect S-status?

To elect S-status for your corporation the IRS requires that you file the Form 2553 - Election by a Small Business Corporation. The form must be filed within 75 days of your corporation's formation date. The signatures of all shareholders are required on the form in order to file for and obtain S-status.

Note: A few states require that your corporation file an additional S-Corp election form in order for your entity to be taxed as an S-Corp at the state level. Please check with your state's tax department.

Are there any differences in the structure of an S-Corp vs a C-Corp?

No, the structure of an S-Corp is the same as that of a C-Corp. It is Important to remember that an S-Corp is simply a C-Corp that has elected to be taxed as a pass through entity.

* The shareholders are the owners and elect directors who then appoint officers.
* One person can act as sole director and hold all offices.
* One person can own all shares but corporation is still required execute formalities.