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S Corporation Tax Profile

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Definition:

An S-Corporation is a regular corporation that has between 1 and 100 shareholders and that passes-through net income or losses to shareholders. More information: S Corporation Definition & Eligibility Criteria.

Minimum Number of Shareholders:

One

Maximum Number of Shareholders:

100

Tax Treatment:

S Corporations are not subject to federal income taxes. Instead, all profit or losses are passed-through to shareholders. All income is taxed at the shareholders' individual tax rates. S Corps may be subject to various state and local taxes. More information: S Corporation Taxation.

Formation:

Shareholders must first incorporate as a regular corporation in their home state, and then the shareholders must file IRS Form 2553 to elect their status as an S Corporation for federal tax purposes. More information: Forming an S-Corporation and Electing S-Corporation Status.

Tax Form:

1120S. More information: Preparing IRS Form 1120S and Schedule K-1.

Deadline:

Form 1120S is due on March 15th, or the 15th day of the third month after the end of the S Corporation's tax year. Request an automatic extension using IRS Form 7004; the extension is good for 6 months, for a second deadline of September 15.

Subject to Self Employment:

Shareholder-employees must receive wages on a W2 statement. Shareholder wages are subject to FICA taxes. Profit distributions from the S-Corp are not subject to self-employment taxes. More information: S Corporation Payroll for Shareholders

Biggest Pitfall:

S Corporations must pay reasonable salaries to shareholder-employees.

Biggest Advantage:

S Corporations can pass-through net business losses to their shareholders, which will reduce shareholder's taxes.
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