S Corporation Formation Services
Have you heard the latest benefits of forming an S Corporation, but you're still confused on if it is the next best step for your business?
Have you tried to determine your reasonable salary compensation and complete the required IRS form, but you find yourself stressed out?
Don't be intimidated about forming an S Corporation, and don't allow the misinformation on the internet to prevent you from moving forward. We will remove the stress and uncertainty of forming an S Corporation and provide you with everything you need to comply with the IRS.
What is an S Corporation?
S corporation stands for "Subchapter S corporation." An S Corporation is a business that elects to pass the corporate income, losses, deductions, and credits to their shareholders.
Advantages Of An S Corporation
- An S Corporation's main advantage is that it's only taxed once according to section S of the Internal Revenue Code. Therefore the S corporation does not pay federal income taxes.
- The corporation "elects" to pass on its income, losses, deductions, and credits to its shareholders for tax purposes. This pass-through taxation allows the corporation to avoid paying double taxes on income.
- As an S Corporation, your company can attract investors by offering shares of stock in exchange for capital to fund continuous growth.
- The business can continue to operate even after the owners depart.
- If you ever decide to sell your business, you'll pay a lot less in taxes when selling an S corporation than selling a C corporation.
- S Corporation provides personal liability and asset protection that prevents the officers, directors, and shareholders from being held responsible for its debts.
Disadvantages Of An S Corporation
- Because the S Corporation status allows for distributions to a shareholder, the IRS scrutinizes payments to make sure the characterization conforms to reality.
- The IRS can revoke the S Corporation status and asses back taxes for 3 years and impose a further 5-year waiting period to regain the tax status if the company doesn't adhere to the tax rules and compensation requirement.
- The IRS keeps a close eye on whether the officers are paying themselves a "reasonable" salary.
- S Corporations are not treated equally by each state government.
How An S Corporation Will Help You Save Taxes?
Use the example below to understand the tax-saving benefits of becoming an S Corporation.
Jamie is the owner of Jamie's HR & Business Consulting firm. Last year Jamie earned $350,000 in Gross Revenue that resulted in $150,000 remaining in Net Profit. ($350,000 Gross Revenue - $200,000 Annual Expenses = $150,000 Net Profit).
|Estimated Business Tax Savings|
|Business Structure||Limited Liability Company||S Corporation|
|Annual Gross Revenue||$350,000||$350,000|
|Annual Expenses Total||$200,000||$200,000|
|Annual Net Profit||$150,000||$150,000|
|Estimated Self Employment Taxes (@ 15.3%)||$22,950||$9,945|
|Estimated Tax Savings||$13,005|
When to file an S Corporation?
For the S Corporation to take effect in the current calendar year, you want to file no later than two months and 15 days after the start of the tax year when the election is to take effect.
If you desire to file after the deadline, you have the option to have your S Corporation retroactive by filing and receiving IRS Relief.
Requirements For Becoming an S Corporation
To qualify for S corporation status, the corporation must:
- Be formed as an LLC or C Corporation first.
- Be a domestic corporation.
- The shareholders must be individual U.S. citizens or green-card holders (resident aliens).
- The S Corporation can not have more than 100 shareholders.
- Have only one class of stock
- All shareholders must consent to become an S Corporation in writing.
How Can SYTP Assist with becoming an S Corporation?
Over the years, we have assisted several business owners across the United States with achieving their S Corporation status, and we'd be happy to assist you as well.
Please review our S Corporation Service Options below and schedule a session with us today.
S Corporation Formation Only
If your business is currently structured as an LLC or C Corporation, we can immediately form your S Corporation. This service option includes:
- 30-Minute Pre-Formation Consultation
- Completion of S Corporation Election Form
- Complete Payroll Set up
- S Corporation Comprehensive Compensation Report
- S Corporation Accountable Plan
- 12-Month IRS Compliance Calendar
- 30-Minute Post-Formation Consultation
One-Time Investment - $1,000
S Corporation Formation Plus LLC Formation
In order to receive the S Corporation election, your business must be an LLC or C Corporation.
Here at SYTP, we can form the LLC entity for your then upon approval from your state, we will proceed to form the S Corporation.
This service option includes:
- Everything in Package A plus
- Limited Liability Company Formation
- State Name Search
- Business Registration
- Federal Tax ID (EIN) Creation
One-Time Investment - $1,600