My Queue

There are no Videos in your queue.

Click on the Add to next to any video to save to your queue.

There are no Articles in your queue.

Click on the Add to next to any article to save to your queue.

There are no Podcasts in your queue.

Click on the Add to next to any podcast episode to save to your queue.

You're not following any authors.

Click the Follow button on any author page to keep up with the latest content from your favorite authors.


The S Corp Deadline Is Approaching: What to Know

The S Corp Deadline Is Approaching: What to Know
Image credit: Shutterstock
Guest Writer
CEO of
4 min read
Opinions expressed by Entrepreneur contributors are their own.

How you approach your taxes can make a big difference to your bottom line. The S Corporation filing is one of the easiest tax forms to complete. For certain situations, and understanding it fully can help you save money on taxes, while still enjoying the other benefits of a C Corporation. Use these tips as a conversation starter for you and your tax professional to help determine what is best for your particular circumstances.

1. An S Corporation isn’t actually a business entity. An S Corp is a tax election made with the IRS that allows a business to be taxed as a sole proprietor or partnership. It’s often referred to as a ‘pass-through’ entity since the corporate profits and losses are passed through and reported on the personal income tax returns of its shareholders. 

Taking the S Corp election doesn’t change how your business is structured. For instance, if you have a C Corporation, you can file to be taxed like an S Corp, your company will still be recognized as C Corporation and all other C Corp rules apply (including liability protection and all your C Corp paperwork obligations). Likewise, a limited liability corporation can also choose to be taxed like an S Corp.

2. S Corp benefits. Avoiding double taxation is a key incentive for the S Corp election. A corporation is a totally separate entity from its owners. When a C Corp makes money, it files a tax return and pays taxes (federal and probably state) on those profits -- the first point of taxation. If the corporation takes its profits and distributes them to shareholders, those distributions will be taxed as well, but this time on the shareholder’s personal tax return. In essence, those profits are taxed twice: first with the corporation’s tax returns, then on the individual shareholder’s personal return.

The business itself doesn’t file its own taxes; rather shareholders report their individual shares of the business’ profits and losses on their own personal tax return. For example, as an S Corporation shareholder, you’ll be taxed based on your percentage of ownership. If you own 50 percent of an S Corp that is profitable for the year, then you will need to pay taxes on 50 percent of the profits (i.e. if the company brings in $50,000 in profit, you’ll pay taxes on $25,000).

Since that income can be taxed as a distribution, you might get a favorable tax rate (but speak with a tax advisor about specific rates and distributions). Of course, you can’t pay yourself entirely with profit distributions. If you work in the business, you’ve got to pay yourself a reasonable salary for your job (and this will be taxed as regular income on your tax return and not as a distribution). But again, the key message here is that the company itself never pays taxes on the profits with the S Corporation – it’s just passed on to individuals.

3. Not everyone can file for S Corporation treatment. The IRS places strict guidelines on who can be an S Corporation. In general, S Corporations have fewer shareholders, the shareholders are individuals, and you only have one class of stock. Specific guidelines include:

  • An S-Corp cannot have more than 100 shareholders
  • All shareholders in an S-Corp must be individuals (not LLCs or partnerships) and legal residents of the United States.
  • An S-Corp can have only one class of stock, so all shareholders need to pay taxes strictly based on their percentage of ownership

4. The approaching deadline: March 17. For existing C Corporations and LLCs, you have until March 17 to take the S Corp election for 2014. New companies have 75 days from the date of their incorporation. To file, you’ll use IRS Form 2553. Since there are strict deadlines this paperwork, make sure to plan ahead or your S Corporation treatment will not begin until 2015.

More from Entrepreneur

Dustin's experience and expertise can help you monetize your message, build a marketing strategy and connect with influencers.
In as little as seven months, the Entrepreneur Authors program will turn your ideas and expertise into a professionally presented book.
Are you paying too much for business insurance? Do you have critical gaps in your coverage? Trust Entrepreneur to help you find out.

Latest on Entrepreneur