What Is an S-Corporation?

Back to FAQs

 

If you’re thinking about forming an S-Corporation, you might be wondering about the benefits of the business entity and how this type of organization differs from a standard corporation. Many new business owners seriously consider forming an S-Corp, due to the tax advantages and personal liability protection that this structure offers.

What Is an S-Corporation?

An S-Corporation, commonly called an S-Corp, is a business entity that is incorporated and has registered for additional S-Corporation status. Typically, a for-profit corporation (C-Corporation) pays federal income tax at the corporate level and then shareholders of the C-Corp pay federal income tax on the shares they receive. This is known as double taxation.

With an S-Corporation, shareholders can avoid double taxation. Taxes for an S-Corp are not levied on the corporate structure; rather they’re “passed through” and reported on shareholders’ personal income tax returns. As a comparison, keep in mind that partnerships, LLCs, and sole proprietorships also receive pass-through taxation.

What Does the “S” in S-Corporation Stand For?

The “S” attached to a corporation stands for “small business.” Corporations with fewer than 100 owners are considered small businesses, and they may elect to register for S-Corp status.

Benefits of a S-Corp

Along with avoiding double taxation, an S-Corporation provides many benefits to business owners. S-Corps, like standard C-Corps, give business owners personal liability protection from business-related lawsuits. If a vendor or disgruntled customer sues an S-Corporation, the business owners’ homes and other assets are protected and may not be sought after as part of a lawsuit.

Who May Become an S-Corp?

There are several criteria that business owners must meet in order to be recognized as an S-Corporation. First of all, the business owners must have already incorporated and received federal tax IDs. In addition, S-Corp owners must meet a series of tests.

The process of forming an S-Corp involves many steps, and some people find the journey to S-Corporation status a complicated one. Irs-ein-tax-id.com offers assistance in filing for an S-Corp and filling out paperwork to obtain a federal tax ID. We help our clients make sure they meet all requirements to file as an S-Corp, which includes determining if shareholders are qualified to be part of an S-Corporation.

S-corporation status can offer an easy way for business owners to manage their finances, not only at tax time, but also throughout the year. An S-corporation can be an excellent way to save your business money and limit your tax liability. For more information on the benefits of the S-corporation, contact us today.

S-Corp Is Perfect for Any Size Business

The S-corporation identification number can be obtained if your business meets several different qualifications. If the business is a US corporation and does not have more than 100 shareholders, you can probably be an S-corp. Not all businesses are eligible, including financial institutions and insurance companies.

With the S-corporation, you can easily save money during the year, as it is not subject to double taxation. The owner of the S-corporation reports income and losses on personal tax returns for federal tax purposes.

S-Corp Allows for Short and Long-Term Benefits

When you are trying to get an EIN for an S-corp, start by submitting your paper or online application. The quicker you complete your application, the sooner you will be able to reap the benefits for your business.

If your business is an S-corporation, you’ll have peace of mind, as it’s separate from you and any shareholders. The employees of the S-corporation can enjoy flexibility in the distribution of earnings. You will be held to a high standard with an S-corporation, as there are more rules when it comes to required forms and filings.

The S-corporation can not only help you save money when it comes time to collect taxes, but it also helps you accumulate more money throughout the year. You can easily obtain an EIN for your S-corp, so take the necessary steps to save your business money immediately.

Select Your Entity Type to Apply for a Federal Tax ID Today