An S Corp is a tax election for a small business corporation or LLC that allows the company to pass its income, loss, deductions, and credits through to its owners. The company itself is not subject to tax. And that income is subject to the shareholder’s individual tax bracket, which may be lower than self-employment tax.
To take an S Corp election, you’ll need your original business filing documents (either as an LLC or corporation) and an employee identification number (EIN). For an LLC, you will need to have “checked the box” to be taxed as a corporation. You will then file Form 2553, Election by a Small Business Corporation, with the IRS. If you select our S Corp product, we’ll take care of that for you.
While an S Corp election can help reduce your tax liability, there are a few extra steps you’ll need to do as part of your business operations. One of the biggest is making sure you’re drawing a reasonable salary and filing the necessary quarterly payroll and tax forms. You’ll also need to ensure your business financials are maintained and updated, as well as annual business filing requirements depending on your state and industry.