1What is the deadline for selecting S Corporation status?
To qualify as an S Corporation in the present tax year, a “calendar year” corporation must timely file IRS Form 2553 with the IRS. If a corporation was in existence prior to the present tax year, then this filing must be submitted to the IRS on or before: March 15 of the present tax year. If the corporation is a “New Corporation”, then the S Corporation election may be submitted at anytime during its tax year so long as the filing is made no later than 75 days after the corporation has began any of the following activities (whichever is earliest): conducted business as a corporation, acquired assets or issued stock.
2What is the difference between an S Corporation and a C Corporation?
An S Corporation begins its existence the same way that a C Corporation begins its existence, as a general, for-profit corporation upon filing the Articles of Incorporation at the state level. However, after the corporation has been formed, it may elect S Corporation status by submitting IRS form 2553 to the Internal Revenue Service (in some cases a state filing is required as well). Once this filing is complete, the corporation is taxed like a partnership or sole proprietorship rather than as a separate entity. Thus, the income is “passed-through” to the shareholders for purposes of computing tax liability. Therefore, a shareholder’s individual tax returns will report the income or loss generated by an S-corporation.
3What factors are required for a corporation to qualify for S Corporation status?
The corporation must:
- Be filed as a U.S. corporation.
- Maintain only one class of stock.
- Maintain a maximum of 100 shareholders.
- Be comprised SOLELY of shareholders who are individuals, estates or certain qualified trusts, who consent in writing to the S Corporation election.
- NOT have a shareholder who is a non-resident alien.
- Failure to observe ANY of the above requirements could revoke S Corporation status at any time.
4If I have special instructions for my order, where can I put those?
Any special instructions regarding your order can be put in the comments section.
5Who should elect S Corporation status?
Owners who want the limited liability of a corporation and the “pass-through” tax-treatment of a partnership will often make the S Corporation election. In most cases, corporations that would benefit from S Corporation status are those who plan on distributing the majority of earnings to its shareholders in the year those earnings are derived. Corporations who plan on retaining earnings for future investments in future tax years often choose the C Corporation because under the S Corporation, earnings will be taxed as if they were distributed to shareholders regardless of whether a distribution actually occurred or whether the corporation retained the earnings for future investment.
6What are the S Corporation formalities?
An S Corporation follows the same state formalities as does a C corporation (i.e. filing Articles of Incorporation and paying state fees). However, an S Corporation must make a special tax election under sub-chapter S of the Internal Revenue Code by filing IRS Form 2553. In addition, certain states require that the corporation file an S Corporation Election at the state level as well.
7Who is the legal representative?
The legal representative is the person that will be the official contact person for the IRS. This will be the person the IRS will contact if they need more information or have questions concerning your filing.
8Do we need to give the address if the phone number is required?
Having contact information that is complete is very helpful to the IRS and will help make sure that there are no problems in filing your documents.
9Why do you need my Social Security number?
The IRS requires the social security numbers of all shareholders in order to file the necessary forms to establish an S-Corporation.
10Do I need to list all shareholders?
You must list all of the shareholders of the corporation. In order to qualify as an S-Corporation there can be no more than 100 shareholders.
11Why do you need to know my spouse's name?
This is to establish whether you and your spouse, if you are both shareholders, must be listed separately as shareholders or whether you can be listed together. This is required by the IRS.