How to form an S-corp:
All businesses start out formed as a C-corporation which is taxed under sub chapter C of the International Revenue Code (IRC). They are faced with double taxation; Corporate tax as well as tax on dividends paid to the stock shareholders. In order to avoid double taxation, most corporations will elect to file an S corporation.
S-corporations differ from C-corporations because they do not have corporate tax. Each stockholder instead lists the annual profit on their individual tax return. This method of taxation is called “pass-through” taxation. The owners pay any tax that is due after filing a federal return (Form 1120s).
To have your business taxed as an S-corp instead of a C-corp your business must meet the following requirements:
- Have only 1 class of stock
- Have no more than 100 shareholders
- Shareholders must be US citizens or residents (Corporations or partnerships cannot be shareholders)
- Be a domestic corporation
- All the shareholders must consent
If your business meets the requirements and you would like to become an S-corp you must file on or before the fifteenth day of the third month of the tax year to which the election will apply. Using form CT-6 a federal S corporation can elect to be taxed as a New York S corporation. The form is available at the link below and can be faxed to: (518) 435-8605
In addition to CT-6, you must also file IRS form 2553. The form is available at the link below and can be faxed to (855)270-4081