What Is an S Corporation?

An S corporation is a standard 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, wherein corporate formation documents must be filed with the appropriate state agency and the necessary state filing fees must be paid. The S corporation’s special tax status eliminates the possibility of the double taxation that is common to C corporations. With S corporations, a corporate income tax return is filed but no tax is paid at the corporate entity level. Instead, the profits or losses of the corporation are “passed-through” to the shareholders, and are then reported on the shareholders’ individual tax returns.

What Are the Advantages of an S Corporation?

• No Double Taxation – S corporations avoid the possibility of double taxation on corporate profits.
  
  
• No Personal Liability – Shareholders of an S corporation are typically not personally responsible for the debts and liabilities of the business.
  
• Easily Transferable Ownership – Ownership of an S corporation is easily transferable through the sale of stock.
  
  
• Unlimited Life – S corporations have unlimited life, and are not affected by the illness or death of the owners.
  
  
• Stock Can Be Sold – Additional capital can be raised by selling shares of the S corporation's stock.
  
  
• Professional Appearance – Potential customers may perceive an S corporation as a more professional entity than a sole proprietorship or partnership.
  
  
• Less Frequent Auditing – S corporations are generally audited less frequently than sole proprietorships.
  
• Many Tax Advantages – Certain S corporation business expenses may be tax-deductible, S corporations can result in savings on self-employment taxes, and S corporations may provide a number of other income and tax savings as well.

S corporations are subject to ownership restrictions imposed by the IRS. S corporation owners (shareholders) must meet the following criteria:

• Number fewer than 100
• Cannot be non-resident aliens
• Cannot be C corporations, other S corporations, limited liability companies (LLCs), partnerships or certain trusts.

How Do you Form an S Corporation?

To create an S corporation the proper formation 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 must be paid. After the corporation is created at the state level, a timely filing with the IRS of Form 2553 is necessary to elect S corporation status. The election process typically takes approximately 60 days, according to the IRS instructions. B2B Credit can prepare IRS Form 2553 and assist you in obtaining S corporation status from the IRS for your business. With B2B Credit’s corporation obtainment service, B2B Credit undertakes interaction with the IRS and notifies you immediately after receiving the acceptance.

Why Should You Use B2B’s Corporation Obtainment Service?

B2B can set up your S corporation for you. Using our Corporation Obtainment Service is far less costly than hiring a lawyer, although the end result is the same: your business is legally established as an S corporation in the state of your choice. While a lawyer would charge you anywhere from $500 to $1,300 (or more) to create your corporation and file the IRS’ S corporation election paperwork for you, our fee is just $99 for our basic filing.

You save a minimum of $400 with B2B Credit!

To sign up for B2B Credit’s Corporation Obtainment Service and get started forming your S corporation, call us at 1-877-464-3700.