An S-Corp is a closely held corporation that elects not to be treated as a normal corporation. If it meets certain requirements, the S-Corp will not be taxed for the income, as it passes as taxable income to the shareholders. This type of entity is designed for small corporations with minimal shareholders.
Pertinent data of S-Corporations:
Nature of Owner's Income: W-2 income and ordinary income
Federal Tax Forms used for S-Corps:
Income Tax: Form 1120S
Estimated Tax: 1120-W (corporation only) and 8109
Employment taxes: 941 (943 for farmers), 940, and 8109.
Federal Tax Forms for S-Corp shareholders:
Income Tax: 1040 and Schedule E
Estimated Tax: 1040-ES
Additional forms for excise taxes
Compensation reported: W-2, Schedule K-1
Avoids double taxation with payment of dividends
Individual tax rates are usually less than corporate tax rates
S-Corp does not pay corporate tax on its income
No more than 75 shareholders
Must be a domestic corporation
No non-resident alien shareholders
Only one class of stock
Individual, trust and estate shareholders only
A corporation is essentially a legal entity created under specific state law for the purpose of conducting a business or philanthropic activity.
Pertinent data of C-Corporations:
Nature of Owner's Income: W-2 income and dividend income
Federal Tax Forms Used:
Income Tax: Form 1120
Estimated Tax: 1120-W
Employment Taxes: 941 (943 for farmers), 940
Additional forms for excise taxes.
Compensation reported: W-2 (income); 1099DIV (dividends)
Transferability of interest
Continuity of life
Access to corporate benefit plans (medical, life, dental, 401k, etc.)
Unlimited shareholders & multiple classes of stock (in most cases)
Majority shareholders control the vote
Corporate form must be observed at all times
Double taxation of earnings
TaxesTo avoid taxation, businesses do careful tax planning, taking into consideration more than one country's taxation system.
TaxesUnderstand the tax implications of running a small business in California, and learn which state taxes apply based on business type.
TaxesThe W-2 Form is a standard Internal Revenue Service (IRS) form that employers are required to furnish employees at the end of each year.
TaxesTaxes are mandatory fees that individuals and corporations must pay to their governments.
Financial AdvisorLearn about three federal income tax facts that most Americans may not know from one of the most trusted financial resources on the Web.
Small BusinessFind out how becoming a corporation can protect and further your finances.
TaxesA tax return is the form or forms used to file income taxes with the IRS.
TaxesThe number of taxes that we now consider a given did not always exist. Find out how they arose.
TaxesFind out how you can offset the potential tax hikes.
TaxesWith the high tax rate of 35% imposed on large corporations in America, these companies still end up paying way below this rate.