Overview of S Corporations
An S corporation is a special form of corporation that is taxed on a pass-through basis, meaning it doesn’t pay taxes in its own right. Instead, shareholders report profits and losses on personal returns. Therefore, S corps avoid double taxation.
S Corporation Setup
Your new corporation defaults to a C corp but can gain S corp status by meeting requirements and filing paperwork.
S Corporation Taxes and Payroll
When you elect S Corp status, you must file additional end-of-year tax forms, such as the S Corp income tax return. S Corps require more paperwork than single-member LLCs.
S Corporation Payroll Considerations
- Can you have an S Corp with no payroll?
- S-Corp no payroll salary: reasonable salary considerations
- Basics of S Corp payroll: setting salary, calculating taxes, and filing payroll taxes
- Situations where an S corporation can set a shareholder-employee’s wage to zero
Running an S Corp
- Most S corps have one owner who pays himself a salary as an employee and receives profits as distributions.
- Default status for new corporations is C corp, and transition to S corp requires meeting specific requirements and filing necessary paperwork.
Taxation and Benefits of S Corp
- Owners of an S Corp can receive both wages and distributions. Salaries are subject to payroll taxes, while distributions are not.
- S corp allows a company’s profits to pass to owners’ personal returns, offering taxation and liability benefits.