We typically start discussing whether an S Corporation is a viable option with our clients when a company is making or planning to make more than $50k in net income in a calendar year. 

For companies making less than $50k NET, the cost of implementation and management of an S Corp may outweigh the potential tax savings.

Depending on your state and business needs, an S Corp may still not be a good fit. Schedule a call today to discuss YOUR personal needs.

Does your Spouse plan to participate in your business?  If so, shareholders must be on payroll and subject to payroll taxes. This can be advantageous if you want to include them in retirement and profit sharing. You may instead decide to add them as a Director and not a Shareholder. 

Schedule a Call with us to understand the tax benefits and drawbacks of each before adding a spouse or anyone else to your company.

S Corporations are required to file informational tax returns annually, regardless of whether they generate any income or expenses. For federal reporting, this filing is submitted via form 1120S.  State filings are also required and form numbers differ by state. This filing is due on March 15th of each calendar year.

As part of this annual filing, K-1 reports are generated (federal and state) and distributed to shareholders. These K-1s report the shareholders' % share of the pass-through income and deductions that need to be included on their own individual tax returns.

S Corporations are also required to file payroll reports, 1099s for qualified payments to service providers, and annual or bi-annual reports to their state of registration.  If they collect sales tax, they are also required to file periodic sales tax filings.

No.  For existing companies, you must elect to be treated as an S Corporation for tax purposes before March 15th of that calendar year.  For new companies, you can elect S Corporation status on or before the 15th day of the 3rd month following the company formation.

Late election filings can be filed and may be approved, but are subject to operating as an S Corporation for that period, which includes paying shareholders a reasonable salary.

If you are in the real estate industry (i.e. broker, airbnb arbitrage, property management), an S Corp could be a great fit for your company...only if you do not plan to hold real estate in your company.

We highly recommend AGAINST moving any kind of real estate investment or real estate property ownership to an S Corp as it can be very tax disadvantageous.

Only individuals and certain trusts can be shareholders of an S Corporation.  Owners must be US residents. 

An S Corporation can own another S Corporation only in siutations where the same single owner owns both entities.

No more than 100 shareholder

S Corporations pay annual franchise taxes to the state(s) in which they are registered. These tax rates vary by state.

S Corporations do not generally pay income taxes. *  S Corp tax filings produce a K-1 form, which passes through earnings and deductions to shareholders to report on their individual tax return, which is then taxed at their individual tax rates.

_{* S Corporation owners MAY elect to pay state taxes at the entity level via Pass-Through-Entity SALT tax election available in certain states.}