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Subchapter S Corporation Ryan Stachler, Grant Hollingsworth, Jack Armstrong.

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Presentation on theme: "Subchapter S Corporation Ryan Stachler, Grant Hollingsworth, Jack Armstrong."— Presentation transcript:

1 Subchapter S Corporation Ryan Stachler, Grant Hollingsworth, Jack Armstrong

2 Definition An S corporation is a corporation that has elected S corporation tax status Elect to pass corporate income, losses, deductions, and credits through to their shareholders for tax purposes Forming an S corporation allows companies to have the limited liability of a shareholder

3 Advantages Avoid double taxation - only shareholders pay taxes on gains Shareholder limited liability - shareholders are not responsible for accumulation of debts, assets, or lawsuits

4 Advantages Cont. Easy to raise money - they can issue stock to finance expansions, pay debt or finance other activities Existence - they exist for an unlimited amount of time. The owner can die and it still goes on Once a year tax filing requirement - c corporation must do it four times a year

5 Disadvantages Extra accounting - The tax return is much more complicated compared to a sole proprietorship because of the numerous shareholders Not eligible for dividend deductions Additional banking procedures/legal costs

6 Disadvantages Cont. Shareholder ownership restrictions - can only have 100 shareholders and they must be a US citizen Closer IRS scrutiny - Because amounts given to shareholders can be dividends or salary, the IRS makes sure they are being paid for what they do

7 How to set up 1.Review the requirements and organize your business according to those requirements 2.Must meet the following requirements: be a domestic corporation, have only individual shareholders or certain trusts, no more than 100 shareholders, only one type of stock

8 How to Set Up Cont. 3.Form a corporation under your states business laws. This includes filing the articles of organization 4. File IRS Form 2553 which allows your business to be taxed under the subchapter S tax code.

9 How it is taxed The way they are taxed looks like that of a sole proprietorship or partnership They are not subject to corporate taxes They don’t have to pay federal income tax; instead, shareholders pay taxes on certain capital gains

10 Examples As of today there are around 4.5 million S corporations Many of the small businesses in America Gingrich Productions MAKO surgical corp. EMTEQ Electrical & Mechanical Technologies

11 Citations Self-Employed/S-Corporations Self-Employed/S-Corporations Corp.shtml Corp.shtml hapter-s-corporation hapter-s-corporation

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