• In certain instances, changing from a C-Corporation to an S-Corporation for tax purpose can be beneficial, but there are numerous factors to consider before making that change that needs to be discussed with your tax advisor prior to doing so.
  • The election to be treated as an S-Corporation for tax purposes removes the “double taxation” concept of a C-Corporation. With an S-Corp there are no corporate taxes on the earning of the company, instead the taxes on the profit of the company are passed through to the stockholder for reporting on their individual tax return. In retrospect a C-Corporation pays taxes on the corporations profits at corporate tax levels and any dividends distributed to the stockholder are also taxed thus the concept of “double taxation”.
  • Once a company elects to be treated as an S-Corporation, the election is in effect until the company terminates the status or the company no longer meets the criteria to be treated as an S-Corporation. If the election is revoked or terminated, the company cannot make the election again for a 5 year period.