Add Currency Legal Alabama Startup for S-Corporation Forms For Free

An S corporation is a corporation that elects to be taxed as a pass-through entity. Income, losses, deductions, and credits flow through to the shareholders, partners or members. They then report these items on their personal tax return. IRS approval is required for the S election status.

IRC §179 Expense Deduction. Act Number 2008-549, passed by the Alabama Legislature during the first 2008 Special Session, decoupled Alabama in- come tax laws from the bonus depreciation and additional Section 179 provisions of the federal Economic Stimulus Act of 2008.

Alabama Tax Rates, Collections, and Burdens Alabama has a 6.50 percent corporate income tax rate. Alabama also has a 4.00 percent state sales tax rate and an average combined state and local sales tax rate of 9.29 percent.

Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income.

Like a partnership, an S corp is a pass-through entity for tax purposes. Its income, losses, deductions, and credits are passed to the owners–shareholders (if the business is formed as a corporation) and members (if the business is formed as an LLC).

S corporations Business type An S corporation is a corporation that elects to be taxed as a pass-through entity. Income, losses, deductions, and credits flow through to the shareholders, partners or members. They then report these items on their personal tax return. IRS approval is required for the S election status.

Stock ownership restrictions. An S corporation can have only one class of stock, although it can have both voting and non-voting shares. Therefore, there can't be different classes of investors who are entitled to different dividends or distribution rights. Also, there cannot be more than 100 shareholders.

Because of the one-class-of-stock restriction, an S corporation cannot allocate losses or income to specific shareholders. Allocation of income and loss is governed by stock ownership, unlike partnerships or LLCs taxed as partnerships where the allocation can be set in the partnership agreement or operating agreement.

Once a valid S corporation election is terminated or revoked, the corporation or any successor corporation is generally prohibited from making a new election for five years. The five-year period begins with the tax year after the first tax year for which a termination or revocation is effective (IRC § 1362(g)).