Starting an S Corp, or S Corporation, involves electing a special tax status with the IRS. While not a business structure type itself, an S Corp is a tax election that allows eligible LLCs and C Corporations to avoid double taxation. Instead of the business being taxed and then dividends being taxed again at the shareholder level (as with a C Corp), profits and losses are passed through directly to the owners' personal income without being subject to corporate tax rates. This can often lead to significant tax savings, especially for profitable businesses. To form an S Corp, you must first establish a legal business entity, typically an LLC or a C Corporation, at the state level. Once your entity is formed and registered with your state, you can then elect S Corp status by filing Form 2553, Election by a Small Business Corporation, with the Internal Revenue Service (IRS). This guide will walk you through the essential steps, from understanding eligibility to filing the necessary forms and maintaining your S Corp status.
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