If you are going to start a corporation, you must register with the IRS. If you do not make any request for this, your company will automatically be registered as a C company. However, if you want to start a small business, you must notify the IRS. The way to report this to the IRS is on Form IRS Form 2553. The IRS form 2553 S corporation indicates that you are requesting that your new company be small.
There are some advantages for business owners wanting to start a small company. The most important of these advantages is tax. S corporations are not subject to double taxation in the same way that C corporations can be. Another advantage is the distribution of tax responsibilities. In S corporations, tax liabilities are taxed to its partners, not the corporation itself. In other words, if the company has 4 partners and these partners have different shares in the company, their taxes can be calculated according to these rates. Thus, one partner is not liable for the tax liability of another. These rates and tax liabilities are directly related to the shareholder himself.
Things to Know to Found an S Corporation
Not all small businesses qualify for S corporation status. For this, there are some qualifications that the company must have.
-must be local,
– cannot have more than 100 shareholders,
– must not have more than one class of stock,
– must file Form 2553 on time
These are the basic requirements to qualify for an S corporation status. In addition, the instructions for form 2553 IRS company owners should examine in detail. After the owner fills out form 2553, the IRS notifies the company in a letter whether the S corporation election has been approved.
Printable IRS Form 2553 and Instructions for Form 2553
Download the printable IRS Form 2553 in this section and fill it out correctly according to your own company information. Remember, the first step to get S corporation status is to fill out this document.