S Corporation Structure
If you want to choose the S Corporation structure, you should first find out the requirements of starting this kind of business.
From a small business, you can incorporate to an S Corporation. Find the needed resources to make things easier.
Have you heard about the S Corporation? This is just one of the several types of corporation that you can start if you want to enter the business world. You can refer to the Internal Revenue Code to find out how such corporation is taxed. Make sure that you look into subchapter ‘S’. Most of today’s small business owners prefer the S Corporation because it is not subject to corporate taxes. Stockholders will know their profits and losses because it is passed directly. If you don’t want to encounter double taxation, you should opt for the S option.
Additional Info on S Corporation
The pass-through treatment makes it easier for stockholders to enjoy some benefits. The stocks being issued by the S Corporation is only of one class. You may choose to have one owner, without worrying about the self-employment taxes. However, you can’t exceed 75 shareholders for this structure and all of them should be residents of the US. The shareholders must fill out and sign Form 2553 issued by the IRS. Annual returns are filed through Form 1120S and this is simply informational. It is required for taxation purposes of the federal government. It is the duty of the S Corporation to report the authorities about their net profit or loss. You don’t have to worry about any refund or tax payment when you file 1120S because the corporation doesn’t have its own tax status.
Officers and directors of the S Corporation will run or manage the business. Shareholders have the power to appoint the officers. The latter will be responsible or the overall management and corporate governance. The directors will simply appoint which officers will take over for a day. This is a great opportunity for small businesses to incorporate and enjoy the benefits. If you think that this structure will work for you, make sure that you look into the requirements first.
Not all businesses will be suitable to incorporate as S Corporation. As you might have noticed, the number of shareholders is limited. If you want to have more shareholders, this is not for you. Make sure that your shareholders meet the standards before you decide to proceed. You can check with IRS and other concerned government offices to learn more about the S Corporation. There are papers that you must work on to incorporate the business. It’s up to you whether you will hire a lawyer or not. It will all depend on the knowledge that you possess about starting an S Corporation.
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