2553 / 8832 IRS Application

Description

2553 / 8832 IRS Application – Filed, With Taxation Consultation $250

Incorporating an S Corporation or Corporation?

Deciding what type of IRS taxation is best for your business can be a confusing exercise as there may be a compromise between what’s best for protection versus taxation. We help assure the proper IRS tax election is selected for your organization.

What Is an S corporation?

S corporations are corporations that elect to pass corporate income, losses, deductions and credit through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income.

To qualify for S corporation status, the corporation must meet the following requirements:

• Be a domestic corporation
• Have only allowable shareholders (including individuals, certain trust, and estates and may not include partnerships, corporations or non-resident alien shareholders
• Have no more than 100 shareholders
• Have one class of stock
• Not be an ineligible corporation i.e. certain financial institutions, insurance companies, and domestic international sales corporations.

What Is a Corporation?

In forming a corporation, prospective shareholders exchange money, property, or both, for the corporation’s capital stock. A corporation generally takes the same deductions as a sole proprietorship to figure its taxable income. A corporation can also take special deductions. For federal income tax purposes, a C corporation is recognized as a separate taxpaying entity. A corporation conducts business, realizes net income or loss, pays taxes and distributes profits to shareholders.

The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. This creates a double tax. The corporation does not get a tax deduction when it distributes dividends to shareholders. Shareholders cannot deduct any loss of the corporation.