Let’s say you chose to form a corporation (or your CPA advised it).
You adamantly refusing to get taxed twice – perfectly reasonable.
This is when you could make a “Sub-S Election” to get all the benefits of a corporation but pay taxes as a pass-through entity (like an LLC). This means you (the owner/shareholder) claims the corporation profits on your personal return. No double tax: once under the corporation and again under the owner.
A S-corporation has elected to pass corporate income, losses, deductions, and credits through to their shareholders for tax purposes. Income and losses are reported on their personal tax returns at their individual tax rates.
To qualify for S-corporation status:
- Must have no more than 100 shareholders.
- Have only 1 class of stock.
- Have certain types of shareholders (can’t be owned by partnerships or other corporations).
- Certain corporations are not eligible.
Here is the link to the form you must submit: Form 2553, Election by a Small Business Corporation. (Hey, let your CPA handle this for you).
Feel free to contact us today with any questions.