Form with which a corporation may resolve to alter its corporate status top that of a subchapter (S) corporation.
S Corporation With One Shareholder In Chicago
State:
Multi-State
City:
Chicago
Control #:
US-0046-CR
Format:
Word;
Rich Text
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FAQ
Classes of shares If there is only one class of shares, those shares must, as a minimum, have: the right to vote. the right to receive dividends (if the board of directors has declared any) the right to receive the remaining property of the corporation after it is dissolved.
IRS Requirements for an S Corp It must have only one class of stock. There can be no more than 100 shareholders. Shareholders must meet certain eligibility requirements, that is, they must be individuals, specific trusts and estates, or certain tax-exempt organizations 501(c)(3).
With certain exceptions, a corporation is treated as having only one class of stock if all outstanding shares of stock of the corporation confer identical rights to distribution and liquidation proceeds. The regulations then elaborate on how to analyze if there are identical distribution and liquidation rights.
Answer and Explanation: Each corporation must issue common stock, and may also issue preferred stock to other classes of stock, but that is voluntary. This implies that if a corporation issues only one class of capital stock, that class of stock is called common stock.
With certain exceptions, a corporation is treated as having only one class of stock if all outstanding shares of stock of the corporation confer identical rights to distribution and liquidation proceeds. The regulations then elaborate on how to analyze if there are identical distribution and liquidation rights.
Both S corp and C corp businesses have a shareholder basis, also sometimes called a stock and debt basis. Per the IRS, this shareholder basis is your capital investment in a property for tax purposes. In this case, your business is the property.
S corporations are considered flow through entities. The taxable income of a corporation is not subject to federal tax (although some states, including Illinois assess a tax – Illinois' S corporation tax rate is 1.5%). The income flows through to the owners and is subject to tax at the owners' tax rate.
The biggest difference between S corporations and LLCs is how they are taxed. S corporations are taxed as pass-through entities, meaning that the profits and losses are passed through to the shareholders' personal tax returns, while LLCs can choose to be taxed as either a pass-through entity or a corporation.
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.
Corp Election teps for LLCs tep 1 Choose a business name. tep 2 Choose a registered agent. tep 3 File Illinois Articles of Organization. tep 4 Create an operating agreement. tep 5 Apply for an EIN. tep 6 Apply for Corp status with IR Form 2553.
