S Corp Formation Made Easy with Figueroa & Co. of Pasadena

Figco – Pasadena’s premier financial and taxation consultants take great pride in their role in expanding and consolidating our clients businesses throughout Pasadena. We are passionate about what we do and we think that you will find that whatever your financial needs that you agree with us when we say Figco is best.

S-Corp formations are corporations with special tax status agreed on by the Internal Revenue Service (IRS). They offer identical limited liability to the owners, who are referred to as shareholders. This means that owners are not accountable for the business’s debts and liabilities.  S corporations, though, do have to deal with pass-through tax. S corporations are not required to pay tax as a business. What they do is lodge an information taxation return while business revenue and losses are reported using the owners’ individual tax return status.

Taxation that is Payable is the Responsible of the Individual

If you are thinking of running your business under an S Corp status, there is a lot you need to know before taking the plunge. There are a number of different ways a business can be run, especially when taxes are involved, which they normally are. To ensure you have all the information clear in your mind, you should contact financial and tax consultants Figueroa & Co in Pasadena, CA as we don’t just have all that you need to know at our fingertips but we can come up with useful suggestions that you may not have thought about. Figco has years of experience dealing with all the range of financial concerns and has an enviable reputation in Pasadena which is hard to beat. Our team customizes our services to meet the needs of our clients in a considerate and caring manner.

S Corporation Benefits

Many smaller business owners initiate the forming of a corporation and then elect the S corporation status with the pass-through tax option.

Other general advantages are:

  • Limited liability safeguards, meaning that owners are exempt for shouldering the responsibility of business debts/liabilities.
  • Simple ownership transfer.
  • Unlimited lifespan. The corporation’s doesn’t die when the dies
  • Capital can be raised quite easily through selling off shares of stock.
  • Greater respect accorded to them than at the sole proprietor or partnership level.
  • Less auditing is imposed.
  • Taxation deductible expenses.

Restrictions for S corporations

The IRS has set rules governing S corporation owners (shareholders):

  • There can be no more than 100 owners (shareholders).
  • They have to be American citizens / residents.

How to Form an S corporation

A Certificate of Incorporation has to be lodged with the relevant state and a fee paid. After the incorporation process has been completed, a 2553 form has to be completed and lodged with the IRS.

Once the S corporation status has been confirmed, it is necessary to adopt bylaws, conduct the first meeting of shareholders and directors and distribute shares of the stock to the owners.

What are the Main Benefits of S Corps?

Selecting status as an S corporation with the IRS means you are eligible for what is termed pass-through taxation on the profits of the corporation. However, S corporations do still have to lodge corporate taxation returns, but without the necessity to pay taxation at their corporate level. What it means by pass-through taxation is that the S corporation’s profits are passed-through to the shareholders’ individual taxation returns and taxes are then paid on the profits using the individual taxation rate.

The 2353 Form

The Internal Revenue Service (IRS) issues a Form 2553. This is used by those corporations who have elected to be taxed under Internal Revenue Code, Subchapter S, Chapter 1 for corporations who have selected this taxation option. Under Subchapter S these corporations are referred to as “S corporations.” S corporations losses and incomes are not taxed at the corporate level.  Instead, they are passed on to the owner/shareholders where tax is placed on the individual’s tax returns.

When filling in the form accuracy is absolutely essential but this is the reason for S corporation status. You always have to include on the form the name of the business, the full address, incorporation date and incorporation state

It is always of great importance to make sure that all the identifying information is identical to what is already on file with the IRS. You must enter the correct date of when your S corporation election was first initiated which is normally the first day of operation.

When it comes to selecting your taxation some businesses might be qualified to use the fiscal tax year, but most taxpayers have to select the calendar year. If you decide to select a fiscal year, it will be necessary provide evidence which supports your need for that particular period. When it comes to revealing the number of owner/ shareholders the number must not exceed 100. If it does, then eligibility for S corporation is lost.

If you need clear and professional advice about how to form a S corporation, call Figueroa & Co. in Pasadena at 626-793-4322.