Form with which a corporation may resolve to alter its corporate status top that of a subchapter (S) corporation.
S Corporation With Llc Subsidiary In Massachusetts
State:
Multi-State
Control #:
US-0046-CR
Format:
Word;
Rich Text
Instant download
Description
Free preview
Form popularity
FAQ
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.
LLCs are classified for Massachusetts income tax purposes the same way they are for federal income tax purposes. A single-member LLC will be disregarded as an entity separate from its owner for Massachusetts income tax purposes, if it is disregarded for federal tax purposes.
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.
An LLC with two or more members will be treated as a partnership if it's treated as a partnership for federal tax purposes. An LLC will be treated as a corporation for Massachusetts income tax purposes if it is classified as such for federal tax purposes.
Entities that are S corporations for federal purposes are S corporations for Massachusetts purposes, with the exception of security corporations. An S corporation's income, losses, and deductions are passed through to the shareholders, and are reported and taxed on the shareholders' individual returns.
Benefits of starting a Massachusetts LLC: Limits and separates your personal liability from your business liability and debts. Simple tax filing and potential advantages for tax treatment. Strong support for small local businesses. Numerous business tax credits.
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.
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.
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.