Verified Document

S Corporations Term Paper

¶ … corporation is a regular corporation that opts to tax its profits at the personal income tax level. An S corporation must prepare and file an income tax return, but itself pays no tax (if it complies with all of the technical and complex rules of the Federal law). Each shareholder pays taxes on his/her share of S. corporate income on his or her individual tax return. Owner-employees of an S corporation are treated like partners for purposes of employment and benefits. is set up in the same manner as a regular corporation and then files for IRS approval (and sometimes state approval) after hurdling through several IRS regulations.

S Corporation allows the small business owner to avoid dealing with the double taxation of profits and dividends. Also, shareholders may be able to offset business losses by the corporation against their personal income, subject to certain restrictions.

Advantages of the S Corporation

Creation of the corporate shield that, in the absence of personal guarantees, limits the liability of stockholders to their capital investment in the corporation and the usefulness for estate planning purposes of the corporate form of business organization are frequently cited advantages of forming an S corporation. Other advantages include:

The independent life of the corporation makes possible its continuation, and the relatively undisturbed continued operation of the business regardless of incapacity or death of one or more stockholders.

Fractional ownership shares are easily accommodated in the initial offering of stock.

The purchase, sale, and gifting of stock make it possible to have changes in ownership without disturbing the corporation's ability to conduct business.

The requirement that the corporation's finances and records be separate from the finances and records of stockholders reduces the risk of unrecognized equity liquidations.

With only a few exceptions,...

Non-voting stock is not considered a "separate class" for this purpose, however.
A shareholder's basis in the corporation does not include any of the corporation's debt, even if the shareholder has personally guaranteed it. This has the effect of limiting the amount of losses that can be passed through. It is a disadvantage compared to partnerships and limited liability companies, and is one of the main reasons that those forms are usually used for real estate ventures and other…

Sources used in this document:
References

Gessaman, Paul. "Setting up Your Own Business the S Corporation, NF96-255 (Revised

October 1996)." NebFacts. 1996. NebFacts. 4 May 2005

<http://ianrpubs.unl.edu/consumered/nf255.htm>.

'S Corporations." FreeAdvice. 1995. FreeAdvice. 4 May 2005
< http://business-law.freeadvice.com/corporations_s.htm>.

.
Cite this Document:
Copy Bibliography Citation

Related Documents

Corporations Often Use Ineffective Strategies to Tackle
Words: 975 Length: 3 Document Type: Essay

Corporations often use ineffective strategies to tackle workplace diversity issues. For example, many attempt to utilize affirmative action policies prescribe hiring by quota. Such policies are doomed to fail when a company finds itself hiring unqualified people for managerial roles. If that happens, it benefits nobody. People in senior management lose faith in hiring women and minorities and this has a knock-on effect on attitudes throughout the organization as well. In

Corporations Law Initial Public Offerings Ipos Are
Words: 1835 Length: 6 Document Type: Essay

Corporations Law Initial Public Offerings (IPOs) are the first time a privately held company sells its stock to the public. When such corporation needs to raise additional capital, it can either take on debt or sell partial ownership. If the corporation chooses to sell ownership to the public, it engages in an IPO (Initial Public Offerings, 2011, p. 1). Although it is difficult to get on the ground floor of an IPO

Corporations Are Responsible for the Impacts of
Words: 629 Length: 2 Document Type: Essay

Corporations are responsible for the impacts of its decisions and activities on society, the environment, and its own prosperity (What is Corporate Social Responsibility). The practice of selling contaminated product to a market, regardless of which market it is, goes against a corporation's social responsibility. International markets should have the same respect as the home markets for any corporation. There is also the utilitarianism doctrine that says that virtue is

Corporations Send Out Messages Constantly
Words: 10552 Length: 38 Document Type: Dissertation

" The analysis cited above continues to describe the ways in which corporate "life" (in the sense of how many different individuals and entities are vital to the running of a corporation in the current climate): Businesses today must be consumer, profit, and publicly oriented. Only a few years ago, the first two would have sufficed. But, in support of our dualistic argument regarding the marketing concept, that is -- creating exchanges

Corporations and Global Capitalism
Words: 730 Length: 2 Document Type: Essay

Corporations and Global Capitalism As an institution, I feel that corporations are playing a negative role in American society. While they provide a lot of great tools for people, from mobile smart phones to services like online shopping, the reality is that behind the scenes of these corporations, things are not so great. The amount of pressure that workers experience when working at Amazon can be immense, and the work does

Managing the S Corporation Built in Gains Tax
Words: 3207 Length: 10 Document Type: Research Paper

Tax Managing the S Corporation Built-in Gains Tax Basically there are two types of relatively large corporations that exist in the American corporate system. C corporations were first introduced and they are a type of business that exists as a separate entity from its owners and is taxed as such. This is done so that the owners can deflect certain types of liability from themselves to the corporation itself. The owners

Sign Up for Unlimited Study Help

Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.

Get Started Now