What is a S Corporation. This is one of the options available to choose from when considering forming an entity for your new business.
An S Corporation is a legal business entity that allows an individual, or two or more people to own and operate a business. The “S” in S Corporation stands for the subchapter of the IRS code that mandates federal taxation of this type of business entity.
An S Corporation offers two main benefits:
Personal Asset Protection By forming an S Corporation, business owners have a shield of protection from personal liability, known as the “corporate veil.” As a separate business entity, the S Corporation’s owners or shareholders are protected from any debts and liabilities incurred from business hardship, failure, or bankruptcy. A person’s personal assets include all of their possessions, such as their home, other real estate, bank and retirement accounts, vehicles, family heirlooms, jewelry, etc. By forming an S Corporation, business owners have a shield of protection from personal liability, known as the “corporate veil.” As a separate business entity, the S Corporation’s owners or shareholders are protected from any debts and liabilities incurred from business hardship, failure, or bankruptcy.
Pass-through Taxation An S Corporation does not pay taxes on income that is generated as an entity. All income, credits and deductions from the business “pass-through” to the S Corporation’s owners, and they pay taxes on the income at their own personal income tax rates.
Other things to know about an S Corporation include:
A board of directors, which is appointed by the shareholders, oversees all business operations and must hold annual meetings Other things to know about an S Corporation include:
Corporate Bylaws are adopted and maintained by the board of directors.
shareholders are issued stock certificates and are owners of the S Corporation.
The maximum number of shareholders that an S Corporation can have is 100 quantity.
A registered agent is designated in the state in which the S Corporation is established, and also in any other state where it performs business transactions It is important to note that an S Corporation is not a type of business entity, but a tax designation based on IRS tax code. Therefore, you cannot apply to form an S Corporation. Instead, you need to apply to form a C Corporation, and then complete the “Election by a Small Business Corporation” to change the designation.
It is important to note that an S Corporation is not a type of business entity, but a tax designation based on IRS tax code. Therefore, you cannot apply to form an S Corporation. Instead, you need to apply to form a C Corporation, and then complete the “Election by a Small Business Corporation” to change the designation.
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