As a new business owner, you have likely heard information regarding S-Corporations and what it can provide for your business. While much of the information you received is true, some of it is misconceptions. Continue reading to learn the truth about 4 S-Corporation misconceptions and then visit https://www.govdocfiling.com/ to apply for an Employer Identification Number (EIN) online.
- S-Corps Are Formed in the Same Way as Corporations
Even though an S-Corp is a type of corporation, they are formed differently than corporations. First, the corporation must be formed, and then the corporation elects the Sub- S tax status. To make this election, Form 2553 must be filed with the IRS.
- For Tax Purposes an S-Corp and LLC Works in the Same Way
LLCs and S-Corps are similar in how they minimize liability and in the way taxes are paid. Their structure is also alike. However, S-Corps pay income tax through the shareholders (owners) of the business, while corporation pays income tax the net income of the actual business.
- All Small Businesses are Eligible to Form an S-Corp
Corporations that wish to file for S-Corp election must meet specific requirements and limitations. A corporation must have no more than 100 shareholders and must be a domestic corporation, cannot be one of many ineligible corporations, and can have only one type of stock. Check with a tax attorney to learn about other requirements as well.
- S-Corporation Election Can Occur Any Time After the Formation of the Corporation
As required by the IRS, Sub-chapter S Election must be filed no more than 2 months and 15 days after the start of the tax year in which the election is to take effect. The first year of business for startups.
As a new business owner, you may be required to apply for a Tax ID Number. Gov Doc Filing provides a Tax ID application online to take the hassle out of applying available 24/7/365.