Among the multiple business structures the Limited Liability Company and the S-Corporation are two of the most popular, but is it worth it to elect for S-Corporation treatment for tax purposes? Contrary to popular belief an S-Corp is not an entity that is set up like an LLC or Corporation, rather it is a tax designation that owners of LLCs or Corporations may elect. Electing for your business to be treated as an S-Corp for tax purposes allows gains and losses of the business to flow through the corporate entity to the business owners who report the gains and losses on their individual tax returns.
Before your company can be designated as an S-Corp, however, you must ensure that it meets the four requirements of an S-Corporation. First, the corporation or LLC must be a domestic entity. Second, the corporation must be owned only by “allowable shareholders.” You may not elect your business for S-Corp treatment if it is owned by another corporation, a partnership, or nonresident aliens. Third, the corporation must not have more than 100 shareholders. Fourth, there must be only one class of stock issued. After ensuring your business meets these requirements you may elect for S-Corp designation.
Before deciding whether to elect for S-Corp treatment Consider the following pros and cons of an S-Corporation:
Before deciding to elect for S-Corp designation for tax purposes be sure to consult with your tax and legal advisors to ensure you are making the correct decision.
If you are starting a new business and not sure where to start, check out our video and blog post entitled: 6 Key Steps to Starting a Business
McCormick Law & Consulting was integral in the creation of our non-profit. We promised our 12 y/o son that we would keep fighting cancer for kids like him but we couldn’t have kept that promise without John McCormick and his team. We were hooked at our first meeting when John simply asked “ Tell me about you son.” McCormick Law and Consulting took care of all the legal work while allowing us to focus on our mission. John and his team continue to be a great resource and supporter of D-Feet Cancer The Dalton Fox Foundation. We couldn’t have asked for better legal representation. Thank you McCormick Law & Consulting.
I definitely could have created my new business, Davis Wealth Management LLC, but boy that would have been a mistake. Because business formation is not an area in which I practice, I had no idea where my blind spots were, and let me tell you there were plenty. The knowledge I received from the firm is invaluable.
John McCormick and his firm are very reasonably priced and quickly and efficiently assisted me in creating my new business. It was completely turn key; they did everything for me. I can't recommend their services enough. Also, huge shoutout to Taylor who kept me informed every step of the way!
John and his team were great to work with. They provided advice for starting my business and set everything up in an efficient and timely manner. I will definitely recommend them to others!
I contacted McCormick Law firm to register my moving service in NC. They did an outstanding job. Completed the process way sooner than I expected. Thank you, Taylor.
McCormick Law, PC d/b/a McCormick Law & Consulting and Driving Defense Law is a boutique law firm located in Norfolk, Virginia & Raleigh, North Carolina, that seamlessly serves clients throughout Virginia and North Carolina. Whether you are a new or existing client of the firm, McCormick Law, PC, cannot represent you on any new matter until the firm has made a determination that there is no conflict of interest and that it is willing to accept the new engagement. The testimonials on this website reflect the real-life experiences and opinions of our clients. However, the experiences are personal to those particular clients, and may not necessarily be representative of all clients. We do not claim, and you should not assume, that all clients will have the same experience. Your outcome may vary.
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