Lesson 1 of 11
What S corporation status means
S corporation status changes how the IRS taxes an existing company. It does not change the company's legal form, liability protection or state registration.
What changes
- The company files Form 1120-S and issues a Schedule K-1 to each shareholder
- Profit and loss pass through to shareholders' personal returns
- Owners working in the business must be paid a reasonable wage through payroll
- Profit distributed beyond that wage is generally not subject to self-employment tax
What does not change
- Your legal structure stays an LLC or a corporation
- State registration, annual reports and franchise tax continue as before
- Limited liability is unaffected
State tax treatment of S corporations varies. Some states do not recognise the election, and some impose an entity-level tax anyway.
Not sure whether the election fits?
The numbers depend on your profit, your role in the business and your state. Gullia Filing's tax team reviews your position, prepares Form 2553 where it makes sense, and sets up payroll so the election holds up.