How to Create an S Corporation
Form a corporation., File Form 2553 “Election by a Small Business Corporation” with the IRS., Include S Corporation taxes on your own income tax return.
Step-by-Step Guide
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Step 1: Form a corporation.
An S Corporation is a tax election that a pre-existing corporation makes after it is formed.
The first step to forming an S Corporation is to form a regular “C” Corporation.
Your corporation must meet all of the following requirements to be eligible to file for S Corporation status:
Determine if you are a domestic corporation.
You must be a United States corporation to be an S Corporation.
Have only allowable shareholders.
The IRS requires that shareholders must be either individuals, certain types of trusts, or estates.
Other business entities, such as partnerships, corporations, and non-resident aliens must not be shareholders in order for the business to qualify.
Have not more than 100 shareholders.
The business may issue more than 100 shares of stock, but it may not have more than 100 shareholders.
Have only 1 class of stock.
Be an eligible corporation.
Certain types of corporations are not eligible for S Corporation status.
Those corporations include banks and other financial institutions, international sales corporations, and insurance companies. -
Step 2: File Form 2553 “Election by a Small Business Corporation” with the IRS.
The form is available on the IRS website.
Fill out the form, have all shareholders sign it, and file it with the IRS. , Remember that the advantage of an S Corporation is that taxes are assessed at your individual tax rate and are only taxed once.
You must include the S Corporation taxes on your own individual tax return. -
Step 3: Include S Corporation taxes on your own income tax return.
Detailed Guide
An S Corporation is a tax election that a pre-existing corporation makes after it is formed.
The first step to forming an S Corporation is to form a regular “C” Corporation.
Your corporation must meet all of the following requirements to be eligible to file for S Corporation status:
Determine if you are a domestic corporation.
You must be a United States corporation to be an S Corporation.
Have only allowable shareholders.
The IRS requires that shareholders must be either individuals, certain types of trusts, or estates.
Other business entities, such as partnerships, corporations, and non-resident aliens must not be shareholders in order for the business to qualify.
Have not more than 100 shareholders.
The business may issue more than 100 shares of stock, but it may not have more than 100 shareholders.
Have only 1 class of stock.
Be an eligible corporation.
Certain types of corporations are not eligible for S Corporation status.
Those corporations include banks and other financial institutions, international sales corporations, and insurance companies.
The form is available on the IRS website.
Fill out the form, have all shareholders sign it, and file it with the IRS. , Remember that the advantage of an S Corporation is that taxes are assessed at your individual tax rate and are only taxed once.
You must include the S Corporation taxes on your own individual tax return.
About the Author
Marilyn Clark
Marilyn Clark is an experienced writer with over 8 years of expertise in non profit. Passionate about sharing practical knowledge, Marilyn creates easy-to-follow guides that help readers achieve their goals.
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