Part 6/7:
Must be a domestic corporation.
Limit of 100 shareholders, all of whom must be eligible U.S. persons.
Only one class of stock is permitted.
Proper record-keeping and adherence to IRS rules are essential for maintaining S status.
Final Thoughts
Understanding how S corporation taxes work is crucial for business owners aiming for tax efficiency and compliance. Although the entity itself doesn’t pay income tax, the requirements of filing Form 1120S and issuing Schedule K-1 are vital steps in the process.
If you're considering forming an S corporation or want to learn more about its tax advantages, consulting with a tax professional is advisable to navigate the specific nuances of your business situation.