A Subchapter S Corporation is a general corporation that has elected a special tax status with the IRS after the corporation has been formed.

Subchapter S election allows “pass through” of income, expenses, depreciation, profits and loses directly to the shareholder(s) without taxation at the corporate level.

For instance, when a general corporation makes a profit, it pays a federal corporate income tax on that profit. If the company also declares a dividend, the stockholders must report the dividend as personal income and pay more taxes.

S Corporations avoid this “double taxation” (once at the corporate level and again at the personal level) because all income or loss is reported only once on the personal tax returns of the stockholders.

If IRS Form 2553 is filed within 75 days after incorporation and the corporation meets the IRS requirements to become an S corp, the corporation will be treated as an S corporation for tax purposes.

For many small businesses, the S Corporation offers the best of both worlds, combining the tax advantages of a sole proprietorship or partnership with the limited liability and enduring life of a corporate structure.

If you would like to establish S corporation tax status for your business, we will prepare the election form (IRS Form 2553) and send it to you for your signature with easy filing instructions.

Getting Started

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