S Corporations

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).

To become an S corporation, the corporation must submit Form 2553, Election by a Small Business Corporation signed by all the shareholders.


If you are an S corporation then you may be liable for…

• Income Tax Form 1120-S & Form 1120-S (Sch K-1)

• Social security and Medicare taxes and income tax withholding Form 941

• Federal unemployment (FUTA) tax Form 940

• Depositing employment taxes

• Excise Taxes


If you are an S corporation shareholder, then you may be liable for…

• Income Tax Form 1040 or 1040-SR

• Estimated tax Form 1040-ES


Please contact my office for more information.