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What is an S Corporation?

An S Corporation (S corp) is a type of entity that should be considered by Sole Proprietor or General Partnerships seeking to incorporate for tax purposes. Many business owners favor them because they do not pay corporate income taxes like a C corps. S corps are generally a good choice for companies providing a service and won’t have significant startup costs. Here are some more facts about S corps:

Forget Double Taxation

S corps are not required to pay corporate income tax on the profits of the company. Instead, the income and losses are divided and passed directly to shareholders. Then shareholders file their tax returns and pay income tax on their own share of the business profits. Learn more about the tax advantages of an S corp.

Limited Shareholders

The number of shareholders is limited for S corps. A company must have no more than one hundred shareholders in order to qualify to incorporate as an S corp and they must be U.S. citizens or residents. Some exceptions are made for tax exempt organizations but generally, if these restrictions aren’t recognized, the IRS will catch on and double tax them as a C corp instead.

Corporate Tax Return Services

Is an S Corporation the right choice for your business? Consider the tax advantages of an S corp then call William McConnaughy, CPA at 888-225-1272 to discuss how we can prepare your corporate taxes. Or, you can request a free consultation through our website now.