When you decide to incorporate, the default corporation choice is a C-Corporation. While C-Corporations provide a number of benefits, they also have some disadvantages such as double taxation. S-Corporations, on the other hand, have pass-through taxation, and they don't have to file estimated quarterly taxes. But they have their own additional requirements.

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S-Corporation Requirements Vary, So Check With Your State

The federal government has its own requirements for companies that want to be an S-Corporation, as do the states. Sometimes it may seem that the two requirements contradict each other. In this case, the old wisdom that federal law controls is not correct. Whichever standard is the strictest is the one that controls if you want to incorporate in that state. The IRS, for instance, requires all S-Corporations to have no more than 100 shareholders and only one class of stock. Georgia, on the other hand, will not recognize an S-Corporation if it has more than 50 shareholders. Each state has slightly different requirements, so make sure that you know your state of incorporation's requirements before you submit your application.

Stay in Compliance to Maintain Your S-Corporation Status

S-Corporations can often be classified as close corporations, though close corporations do not have to be S-Corporations in every situation. They also tend to be one of the more popular corporation choices for nonprofit organizations, though that is not a requirement in any state. However, S-Corporations must be careful as they are held to much stricter standards than C-Corporations. Failure to follow your state's guidelines will result in your corporation losing its S status, meaning that it will be treated as a C-Corporation. In some cases, this can be established retroactively, meaning that you will have to pay C-Corporation tax rates for that time period. The rate itself is not what's different. It's the manner of assessment.

We make it easy to form an S Corporation, so get started today.

Get Started Start your S-Corp Answer a few questions. We'll take care of the rest.

Get Started Start your S-Corp Answer a few questions. We'll take care of the rest.