What is S-Corporation?

 

One of the disadvantages of Corporation is the double taxation of the profit: the corporation income tax, and the personal income tax of the shareholders when dividing profits. S-Corporation (S-Corp. or Subchapter S-Corp.) is stock company or private stock company which is audited and approved by the IRS and is taxed in accordance with the provisions of S subchapter of IRS Statute Book. It allows the profits go to individual shareholders from company. Therefore, the profit is levied a tax once only. The tax provisions in S subchapter only apply to small companies and limited to the federal tax of the company. In some states, companies need to submit an application to the state to require the same tax treatment with S-Corporation. Note: the application for S-Corporation shall be submitted immediately after registration, or the application can be re-submitted until the next fiscal year.

Conditions for applying for S-Corporation:
●Submit the 2553 table timely
●Approved by all the shareholders
●The number of the shareholders is no more than 100
●Shareholders are not aliens which are not the residents in the United States
●Shareholders are not in other companies

 

The advantages of S-Corporation:
●The tax Payment of the corporate profits is through the personal way
●The investors can charge off the early losses
●Avoid the double taxation of dividends

 

The disadvantages of S-Corporation:
●The number of shareholders is limited to 100 people or less
●Only one kind of share can be issued
●Can not own or control a large number of subsidiaries