An S-Corporation is the same as a C-Corporation (usually referred to as simply “Corporation”) except S-Corporations are not taxed twice. Corporate profits are taxed twice: the corporation is taxed at the corporate level, money from the corporation flows through to the shareholders, and the shareholders are also taxed. In other words, generally speaking, the same money is taxed twice. S-Corporations are different because they aren’t taxed at the corporate level at all. Individual shareholders of the S-Corp are charged with the responsibility to report corporate income, losses, deductions, credit, etc. on their personal tax returns.
Creation of an S-Corp
To create an S-Corp, or to change status from C-Corp to S-Corp, you must send in an application to the IRS on federal form 2553. Once you’ve received your approval, send a copy on to the Utah Tax Commission (or the tax commission in whichever state you’re seeking S-Corp status).
Requirements to Create an S-Corp
There are several requirements in order to be eligible for S-Corporation status, but arguably the three biggest requirements are (1) the corporation can have no more than 100 shareholders; (2) the corporation can have only one class of stock; and (3) the corporation must be domestic (formed in the same state you’re seeking S-Corp status).
Pros & Cons of an S-Corp
Because an S-Corporation is operated exactly the same as a Corporation, refer to our Corporations Page to review the pros and cons.