When opening up your business it can get intimidating and confusing in regards on taxes and how to pay your self. This post is an attempt to alleviate the stress involved with opening up your business. Here at Five Star Brokerage you can rely on professional and accurate tax advice to keep more of your hard earned dollars in your profit. Ready? Here we go:
1. Corporation definition as per NYS Department of State Website -
A business corporation is a legal entity separate and distinct from the individual(s) who compose the business. It has rights and abilities similar to those of a natural person. Principal features are perpetual duration, limited liability and easy transferability of interests. A corporation may be formed for any lawful business purpose or purposes
Similar to the above definition the S-corp is a tax election with the IRS to avoid paying corporate tax. As per the IRS website below is a definition for the S-corp:
S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.
To qualify for S corporation status, the corporation must meet the following requirements:
Be a domestic corporation
Have only allowable shareholders
May be individuals, certain trusts, and estates and
May not be partnerships, corporations or non-resident alien shareholders
Have no more than 100 shareholders
Have only one class of stock
Not be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations).