An S-Corporation, which is commonly referred to as an S Corp, is like a C-corporation which provides opportunities for investments. It is more appealing to small-scale businesses because it offers beneficial taxation features with limited liability protection. S Corps only need to file taxes once a year and the best part is that they are not double taxed.
What are the Benefits of an S-Corporation?
S-Corporations have several benefits:
- The most attractive benefit is that it offers limited liability. This means that the directors, shareholders, employees, and officers of the company are protected from certain financial downfalls if the company fails.
- Another benefit is the use of pass-through taxation, which means the company owner reports profits and losses on his/ her personal returns instead of filing business returns.
- What makes S-Corporations so lucrative is the fact that you do not have to pay any income taxes, rather the returns or losses are divided and passed through to its shareholders and the shareholders on an individual bases report the income tax returns.
- Another plus point of S-Corp is, here the interest of the shareholders is freely transferable, while the same is not applicable in case of LLCs.
- Most importantly, an S-Corp company has perpetual existence, which means it continues to operate even if the owner passes away or leaves the business.
What do I need, to File Income Tax returns for S Corporation?
Filing an Incoming tax is easier in S-Corp.
- You need a profit and loss statement for the financial year
- Balance sheets for the start and end of the year.
- Particulars of the corporate officer remuneration, total value of the goods sold, and the numbers of assets added to the business in order to calculate the depreciation.
What Are the Eligibility criteria for an S Corp?
Not all types of corporations’ quality for the S-Corp status. There are few mandatory requirements that include:
- Only permissible up to a limited number of shareholders.
- Restricted only to U.S. citizens.
- Includes shareholders who are all individuals
How Do I Apply for an EIN for an S Corp?
Applying for an S Corp tax ID number is as easy as using the IRS-EIN-Tax-ID website. Simply navigate to the section for S-Corporations and begin the application process. You’ll answer a few questions about your S Corp as well as several questions about yourself. The application is easy to understand and takes just a few minutes to complete. Submit it along with the one-time filing fee and you’ll receive your EIN number in your email I a short time. In fact, if you submit your application before 3:00 p.m. PST, there is a good chance you’ll get your number on the very same day. If you submit it after business hours are over, you’ll receive a response the next business day.
Having an EIN number for your S-Corporation is imperative to running a legal and successful business. To learn more about how to apply for an EIN online, get in touch with IRS EIN Tax ID Filing Service today.Tags: Corporation , S-Corporation , scale businesses