S Corporation With Llc Subsidiary In Kings
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FAQ
Apply to the IRS for S corporation status. Once your LLC or C corporation formation is approved by the commonwealth, you need to file Form 2553, Election by a Small Business Corporation, to get S corp status.
Corporate excise taxpayers not filing as part of a combined report receive an automatic 6-month extension to file. These taxpayers generally include S Corporations, Security Corporations, Financial Institutions, Insurance Companies, Urban Redevelopment Companies, and Business Corporations.
Once your LLC or C corporation formation is approved by the commonwealth, you need to file Form 2553, Election by a Small Business Corporation, to get S corp status.
In order to become an S corporation, the corporation must submit Form 2553, Election by a Small Business Corporation signed by all the shareholders. See the Instructions for Form 2553 PDF for all required information and to determine where to file the form.
Disadvantage #1: Not Making Enough Taxable Income If your business is not earning enough income, the costs of an S-Corporation may outweigh the benefits. Many tax advisors believe that business income should exceed $40,000 before considering an S-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.
One major advantage of an S corporation is that it provides owners limited liability protection, regardless of its tax status. Limited liability protection means that the owners' personal assets are shielded from the claims of business creditors—whether the claims arise from contracts or litigation.
Unlike an S Corporation or an LLC, it pays taxes at the corporate level. This means it is subject to the disadvantage of double taxation. As well, a C corp also must comply with many more federal and state requirements than an LLC. C corporations provide the following considerable advantages: Separate legal identity.
Step 2: Weigh the pros and cons Advantages: Enhanced credibility, access to capital, limited liability, and the ability to attract investors and top talent. Disadvantages: Higher setup and maintenance costs, double taxation, extensive record-keeping and reporting requirements, and reduced privacy.
