How Do I Set-up an “S” Corporation?

In its simplest form, you start with an eligible small business corporation and then file an “S” election with the IRS.  The “S” election is made using IRS Form 2553.  All shareholders of the corporation must consent to the “S” election.  The election is effective on the first day of the first tax year after the election is filed, or on the first day of the current tax year if filed by the 15^th day of the third month of such tax year. 

Only an eligible small business corporation may make an “S” election.  A corporation is an eligible small business corporation only if it: (a) is a domestic corporation; (b) has less than 100 shareholders; (c) all of the shareholders are individuals, estates, certain trusts or certain tax-exempt organizations; (d) none of the shareholders are nonresident aliens; and (e) there is no more than one class of stock. 

It is possible for an LLC to make an “S” election.  More on that in a future blog.  It is also possible to correct a late filing.  More on that in the future as well.

Hope you found this material helpful.  If you like what you read, forward this to a friend and tell them to check it out by clicking on the SenneySays logo.  If something you read here raises a question, please call or email at Jsenney@pselaw.com or 937-223-1130. 

AND ONE MORE THING:   Do you know anyone having trouble paying their federal or state taxes?  The IRS offers an Offer-in-Compromise program.  Ohio and other states offer similar programs.    Federal income taxes are subject to a 10 year collection statute.  Ohio and other states have no such collection limitation, and may collect unpaid taxes 20 or 30 years after the date of assessment.  An offer-in-compromise may be used to reduce or eliminate liability for unpaid taxes.  Call or email me if you want to know more about federal or state taxes or how to use the federal or state offer-in-compromise programs.  Jsenney@pselaw.com or 937-223-1130.