What is S-Corp? Definition, requirements, and how it applies to your business formation. Learn everything about s corporation for LLCs and corporations.
# S Corporation
An S Corporation is not a separate entity type but a tax election (via IRS Form 2553) that allows a corporation or LLC to pass income directly to shareholders, avoiding double taxation. Shareholders who work in the business must pay themselves a reasonable salary, but remaining profits distributed as dividends are not subject to self-employment tax.
The S-Corp election typically saves business owners 15.3% in self-employment taxes on distributions above their reasonable salary. It becomes advantageous when net business income consistently exceeds $40,000-$60,000 annually.
Lovie's formation flow includes S-Corp election filing as an add-on, ensuring Form 2553 is submitted within the 75-day window after entity creation.