S Corp Election
What is a S Corp?
An S corporation is a corporation that has elected a special tax status with the Internal Revenue Service (IRS). The formation requirements for an S corporation are the same as those for a C corporation. Incorporation documents, typically called the Articles of Incorporation or Certificate of Incorporation, must be filed with the appropriate state agency and the necessary state filing fees paid. After the incorporation with the state is complete, the corporation applies for federal S corporation status by filing Form 2553 with the IRS. See full S corp definition.
How to Incorporate a Business: A Simple Guide
So youâre thinking of starting a business, or maybe youâve already started one, but you want to make it official. You want to incorporate. Whatever your reasons for incorporating, hereâs everything you need to know before you take the plunge.
You might hear lawyers sometimes referring to corporations as legal âpersons.â All they mean by this is that corporations are not an extension of you or any other personâthey exist in their own right. This is important mainly because it gives them a superpower called limited liability.
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Generally speaking, this decision should come down to whether or not you plan on taking profits out of your business or reinvesting them back into your business. Filing as an S corporation can lower your tax bill if you (or any other owner) plan on taking profits out of the company in the form of distributions. If youâre a new and growing business and intend to reinvest most of your profits back into the business, on the other hand, sticking to C corporation status can leave you with a lower tax bill.
