A Subchapter S Corporation (S Corp) is a business entity that provides limited liability protection while allowing for pass-through taxation. Unlike C Corporations, which are subject to double taxation, an S Corporation allows profits and losses to pass through to shareholders, who report them on their individual tax returns.
This structure is particularly attractive to small business owners seeking corporate protections, tax efficiency, and flexible management without the heavy tax burdens faced by larger corporations. However, businesses must meet specific IRS requirements and formally elect S Corporation status to qualify.
Easy Ownership Transfers – Ownership can be transferred through stock sales, allowing the business to continue operating even as leadership changes.
Not all businesses can elect to be an S Corporation. The IRS has strict eligibility requirements that must be met:
Step 1: Incorporate as a C Corporation
Choose a business name and verify availability through an entity lookup. File Articles of Incorporation with the state’s business registration office. Appoint directors and officers to manage corporate operations. Adopt corporate bylaws to define governance policies.
Step 2: Obtain an Employer Identification Number (EIN)
Required for tax filings, business bank accounts, and hiring employees. Issued by the IRS upon request.
Step 3: Elect S Corporation Status by Filing IRS Form 2553
Must be submitted within 75 days of incorporation or by March 15 of the desired tax year. Approval from the IRS confirms S Corporation status.
Step 4: Comply with Ongoing IRS and State Requirements
An S Corporation is often compared to a C Corporation and an LLC due to similarities in structure and legal protections. However, key differences make each entity unique.
S Corporation vs. C Corporation
S Corporation vs. LLC
For business owners seeking tax efficiency, liability protection, and a formal corporate structure, an S Corporation is often the best choice.
Electing S Corporation status early in your business’s lifecycle allows you to take advantage of tax benefits from the start. Businesses that qualify for pass-through taxation can reduce their overall tax burden while maintaining the structure and liability protections of a corporation.
Additionally, forming an S Corporation enhances business credibility and ensures the company is set up for long-term growth. Whether you plan to attract investors, expand operations, or transition ownership, having a structured corporate framework provides a strong foundation for success.
We provide comprehensive assistance in forming and maintaining your S Corporation, including:
If you’re ready to establish your S Corporation, we can help you navigate the legal and tax complexities, ensuring a smooth and successful setup.
Perform an Entity Lookup to check name availability and begin the incorporation process.