Ohio requires an S corporation to file a notice of the S election each year. Use Form FT-1120-S between January 1 and March 31. Shareholders are taxed based on their share of income under Internal Revenue Code section 1366. Nonresident shareholders owe Ohio individual income tax.
Commercial Activity Tax (CAT)
The commercial activity tax (CAT) taxes a company’s total Ohio receipts without deductions. File financial statements and Form 1120-S with Schedules K-1. Distribute K-1s to shareholders. Shareholders file Form 1040.
Taxation of S Corporations vs. C Corporations
An S corporation suits owners taking large distributions. S corporations avoid corporate taxes. Their owners owe income tax on distributions. C corporations pay tax then owners owe tax on dividends.
Ohio, Nevada, Texas, and Washington tax business receipts instead of corporate income. Receipts taxes tend to be more harmful than taxes on corporate income.
Filing CAT Taxes
Corporations over $1 million in gross receipts must file and pay CAT taxes quarterly. Others file annually.
To file as an S corporation, prepare financial statements and Form 1120-S with Schedules K-1. S corporations must file an initial federal return.
Tax Filing in Different States
Only South Dakota and Wyoming lack both the CAT and corporate income taxes. An S corporation forms either when an LLC elects S status or a corporation makes the election.
Most businesses must file at least an informational state return and federal return.