Forming an S Corp, or electing S Corporation status, is a strategic move for many US businesses seeking potential tax advantages. It's not a business structure itself, but rather a tax election made with the IRS that allows a qualifying LLC or C Corporation to be taxed under Subchapter S of the Internal Revenue Code. This election can offer benefits like avoiding double taxation and allowing owners to take a salary and distributions, potentially reducing self-employment taxes. However, the S Corp election comes with specific eligibility requirements and ongoing compliance obligations. Understanding these nuances is crucial before making the decision. This guide will walk you through the essential steps and considerations for forming an S Corp, from determining eligibility to filing the necessary forms with the IRS and your state.
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