What is a S-Corporation ?

 What is a 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:

– including individuals, certain trust, and estates and

– may not include partnerships, corporations or non-resident alien shareholders

In order to become an S corporation, the corporation must submit Form 2553 Election by a Small Business Corporation (PDF) signed by all the shareholders.

Source: irs.gov

 

Do you need to create an S-Corporation?