If you are like most business owners out there, you are working tirelessly to turn your business dream into a reality. As this happen and your company grows, your tax rate and responsibilities tend to grow as well. Growing companies face a variety of complexities during tax season, and that’s why when your company starts growing, you may want to consider forming an S Corporation, otherwise known an S Corp. The S Corp is a business entity that offers significant tax advantages while still preserving your ownership flexibility. 

Keep in mind that tax rates and laws can change from year to year and your strategies may change with this. Do not worry, there are solutions for these changes and while you focus on the business growth stay aware of what is needed from a tax approach. If you need tax help, we are here for you.

What is an S Corp?

An S Corp, also known as the subchapter or small business corporation, is a tax code that was enacted into law by Congress in 1958. The S Corp was created to encourage and support the creation of small and family businesses, while eliminating the double taxation that conventional corporations were subjected to.

How to Qualify for S Corporation Status

According to the IRS, to qualify for S Corporation status, a business must meet these requirements:

• Be a domestic corporation
• Have only allowable shareholders – which may include individuals, certain trusts, and estates, but not partnerships, corporations or nonresident alien shareholders
• Have no more than 100 shareholders
• Have only one class of stock
• Not be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations)

The corporation must also submit Form 2553 to elect S Corporation status for tax purposes.