In the world of the IRS, owners of corporations and limited liability companies may have to take special steps to ensure that their business is set up properly for tax purposes. Unless action is taken, corporations are automatically treated as C corporations while LLCs are treated as either a disregarded entity or a partnership, depending on the number of members or partners. But many corporations and LLCs will be better off filing as an S corp. To correct this matter and make sure your business is set up properly when tax time rolls around, you’ll need to file an S corp election using IRS Form 2553.
Electing to become an S corporation has significant benefits for many businesses. An S corp’s net taxable income is taxed to the shareholders on their personal tax returns, not the corporation itself. S corps are also allowed to write off start-up losses, making them attractive to new business owners. Additionally, C corps can potentially face taxes at both the corporate and shareholder levels but S corps are only ever taxed once, contributing to their appeal.
File an S Corp ElectionNot all businesses meet the requirements to make this election. To qualify, the business must be a domestic corporation or entity, it cannot have more than 100 shareholders, and the shareholders must all be U.S. citizens or residents. But there are other rules regulating what type of business can or cannot elect as an S corporation. To learn more and find out if you qualify, contact Stanford Entity Management LLC now.
Stanford Entity Management LLC is owned by a trusted Coral Gables, FL accounting firm. In addition to business incorporation, we offer complete bookkeeping services and tax strategies for new and growing businesses. Find out what we can do for your small business! Request a consultation online now to learn more or call us.