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Follow on Google News | Want to Start an S-Corp? Here are Three Things to Keep in MindTax Breaks One of the biggest benefits of S corporations is the tax breaks they offer. Owners of C corporations are taxed at the corporate level and shareholders are also taxed when dividends are distributed. This means those profits are being taxed twice. In S corporations, however, taxes are only imposed on shareholders, which can save you more in profits. However, there are certain requirements you must meet before reaping those tax savings. You must file Form 2553 with the IRS within 75 days of incorporating to obtain S corp status. You must then also file annually, although not quarterly, as other types of corporations require. In New York, it is also important to remember that you must file Form 1120S within two years and six months of the end of your business' tax year. In addition to the federal filing requirement, you must also file Form CT-6. Shareholders S corporations also have specific requirements for their shareholders. Shareholders of S corporations cannot be corporations, LLCs, or partnerships. Shareholders must also be United States citizens, and you cannot have more than 100 shareholders in the corporation. You can also only issue one type of stock, and you cannot issue preferred stock to any shareholder. Outstanding shares must always carry the same privileges and rights, even those you own. Residency Requirements If you are not a citizen of the United States, you can be part of an S corp, but you must first pass the Substantial Presence Test. The requirements for the test state that you must be physically present in the country for at least 31 days within the current year, and a minimum of 183 days within the past three years, including the current one. The calculation of this time, and whether or not you meet the minimum requirements, is complicated, but a New York business lawyer can help you navigate the process. Continue reading: https://www.cgelaw.com/ End
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