Why choose a S corporation?

Advantages of a S corp

Many small business owners form a corporation and elect S corp status for pass-through taxation. Other typical advantages include:

• Limited liability protection. Owners are not typically responsible for business debts and liabilities.
• Easy transfer of ownership. Ownership is easily transferable through the sale of stock.
• Unlimited life. When a corporation’s owner incurs a disabling illness or dies, the corporation does not cease to exist.
• Raise capital more easily. Additional capital can be raised by selling shares of stock.
• Credibility. Corporations may be perceived as a more professional/legitimate entity than a sole proprietorship or general partnership.
• Lower audit risk. Generally S corps are audited less frequently than sole proprietorships. • Tax deductible expenses. Business expenses may be tax-deductible.
• Self-employment tax savings. An S corp can offer self-employment tax savings, since owners who work for the business are classified as employees.

S corporation ownership restrictions:

Per IRS guidelines, S corporation owners (shareholders) must meet the following criteria:
• Number 100 or less.
• Must be US citizens/residents (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?
In order to register a business as an S corporation, Articles of Incorporation (sometimes called a Certificate of Incorporation), must be filed with the state and the necessary filing fees paid. After incorporation, Form 2553 must be filed with the IRS in order to elect S corporation status. Also after incorporation, S corporations are also required to adopt bylaws, hold an initial meeting of directors and shareholders, and issue shares of stock to owners.

This package includes documents that may be required to open a bank account in their home country. We suggest contacting the potential banking institution to find out what information is required to open a bank account

Key Benefits

Electing S corporation status with the IRS allows for pass-through taxation of the corporation’s profits. S corps must still file corporate tax returns, but they do not pay taxes at the corporate level. The corporation’s profits are passed-through to the individual tax returns of the shareholders, and taxes are paid on those profits at the individual tax rate.

Keep in Mind
S corporations must make a timely filing of Form 2553 with the IRS. The form must be completed and filed any time before the 16th day of the 3rd month of the tax year in which the election is to take effect, or any time during the tax year preceding the tax year in which it is to take effect. BizFilings can obtain S corp status on behalf of your business as part of our Deluxe Incorporation Service for S corporations