With tax filing season here and the federal tax code changes in place for over a year, you may have discussed the potential tax advantages of an “S” Corporation election. For some, the pass-through tax treatment and 20 percent deduction on qualified business income might provide significant savings. If you have a business that would benefit from being taxed as an “S” Corp in 2019, now is the time for action! The “S” Corp election filing deadline for existing LLCs and corporations is fast approaching, March 15 is the deadline for all “S” Corp filings.

An “S” Corporation is a corporation for which corporate income, losses, deductions, and credits flow through to its shareholders. To become an “S” Corp, a corporation must file Form 2553 (Election by a Small Business Corporation). The corporation itself doesn’t pay taxes at the corporate rate on its profits. “S” Corporations avoid “double taxation”—i.e., when a corporation’s profits are taxed at the corporate rate, and then some of those profits (those issued as shareholder distributions) are taxed again on shareholders’ personal tax returns.  

Corporations that want “S” Corp taxation must meet certain eligibility criteria. Among the requirements are:

  • Must be a domestic corporation (and not one that is ineligible such as certain financial institutions, insurance companies, and domestic international sales organizations) 
  • May not have more than 100 shareholders  
  • May not have shareholders that are non-resident aliens, partnerships, or corporations 
  • May only have one class of stock 

LLC owners might find that choosing “S” Corp tax treatment will lower their self-employment tax burden.

LLCs that meet the same above requirements regarding the number and type of owners can be taxed as an”S” Corp while remaining organized as an LLC.

Make your appointments today for all your Tax Planning Needs

IPS Accounting Services & Consulting

Call Us (843) 637-7100


Published by IPS Accounting Services & Consulting

I was born in Cuba and came to the US at the age of nine during the 1980 Mariel Exodus. After twenty five years of a successful career in Managerial Accounting for private and corporate sectors. At the age of 45 and empty nester I felt my life needed a bigger purpose. Accounting has been my lifelong journey and I wanted the opportunity to help business reach their optimal growth. In addition to being a devoted mother and wife I’m very involved in my community and volunteer much of my time to advocating for righteous causes. I’m devoted to the women’s movement as well as keeping our Hispanic roots and culture alive.

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