Corporate Status Vs S Corporation Status In Fulton
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How to Create an S Corp in Georgia Choose a unique name for your Georgia limited liability company. Appoint a registered agent. File your Georgia LLC Articles of Organization. Create an operating agreement. Register for your EIN Number. Apply for S Corp status with IRS Form 2553.
LLC cons: Unlike a corporation, an LLC cannot issue shares of stock. Any new investor would need to become a member of the LLC, which is more complicated. Furthermore, many outside investors consider LLCs risky, and prefer to invest in corporations.
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.
A Limited Liability Company (LLC) is a business entity that offers certain limited personal liability on the part of the owner, like a corporation. It also offers the possibility of certain “pass-through” tax benefits, like a partnership. Therefore, an LLC is essentially a cross between a partnership and a corporation.
The C corporation is the standard (or default) corporation under IRS rules. The S corporation is a corporation that has elected a special tax status with the IRS and therefore has some tax advantages. Both business structures get their names from the parts of the Internal Revenue Code that they are taxed under.
As a Georgia LLC, LLP, partnership or sole proprietorship, you are subject to the 15.3% Self Employment/FICA tax on all of your net earnings. The S corporation, on the other hand, pays you a deductible salary (which is subject to FICA), and then the profits flow through your personal return via a Schedule K-1.
The IRS does not offer a standard form for changing your company's tax status from S corporation to C corporation. Instead, it simply requires a written statement be filed with the appropriate IRS service center, along with consent signed by a majority (more than 50%) of your corporation's shareholders.
When it comes to actual ownership, C corps have minimal restrictions and virtually anyone can be an owner of the corporation, and there is no cap on the number of owners permitted. S corps, on the other hand, do have a limit on ownership. They are limited to 100 shareholders.
The IRS does not offer a standard form for changing your company's tax status from S corporation to C corporation. Instead, it simply requires a written statement be filed with the appropriate IRS service center, along with consent signed by a majority (more than 50%) of your corporation's shareholders.
If you have high income, your business's current federal income tax liability as a C corporation may be lower than as a pass-through business. Example: Essco is an S corporation, and its shareholders are subject to tax at the highest tax rates. Essco makes $100,000 per year and distributes all its earnings.
