Florida S Corp: Everything You Need to Know
S corporations are also known as standard business corporations. They are essentially a C corporation that files IRS Form 2553 to choose a special tax status.3 min read
A Florida S corp is like other S corporations — businesses that fall under the corporate umbrella but have decided to pass along all credits, losses, income, and deductions to company shareholders to avoid being taxed twice on the business' income.
S corporations are also known as standard business corporations. They are essentially a C corporation that files IRS Form 2553 to choose a special tax status. This special status keeps the corporation from being a separately taxed entity. The income is instead treated like that of a partnership or sole proprietorship.
Qualifying for S Corp Status in Florida
To qualify for an S corporation in Florida, the company has to meet specific criteria:
- The corporation must be domestic
- Shareholders can only be individuals, estates, and select trusts; they cannot be non-resident aliens, partnerships, or corporations
- You cannot have more than 100 shareholders total
- Stock can only be one class
- It cannot belong to a list of ineligible companies, which may include insurance companies, some financial institutions, and locally-based international sales businesses
Advantages of S Corporations
- A higher level of credibility, as people typically trust S corporations more than LLCs
- The "pass-through" taxation, which lets corporations avoid federal taxes by passing them onto shareholders who must report them on personal filings
- A simple ownership transfer process, whereas with partnerships and LLCs, a transfer of more than 50% of ownership means there is a chance the company may be dissolved
- Owners of S corporations are protected from personal responsibility for liabilities and debts of the business
Disadvantages of S Corporations
While S corporations have advantages, there are a few disadvantages as well:
- Limitations on stock ownership as only one type of stock is available
- Stricter scrutiny from the IRS because the taxes are passed on to shareholders, so it's important to keep very detailed records
- Florida S corporations are required to become incorporated, which can be an expensive and time-consuming process
If a company is not at the level to incorporate, an S corporation may not be the right business organization choice. An alternative option would be to start an LLC.
How to Form an S Corporation in Florida
To form an S corporation, there are some basic steps you need to complete:
- Create company bylaws, articles of incorporation, and assess several resolutions; the articles of incorporation are the same no matter whether you're filing as a C corporation or S corporation
- File articles of incorporation with the Division of Corporations; your company name must include something like Corp, Co, Company, Incorporated, or Inc and you will have the option to enter the name of the officers and first directors
- Incorporate a Florida S corporation as a corporation in the state where the corporation will conduct most of its business
- Double check all eligibility criteria required to form an S corporation
- Get all shareholders to sign IRS Form 2533 as there must be a unanimous agreement to create the S corporation
- Notify the IRS that the corporation will be an S corporation for tax purposes
You should plan to have the IRS Form 2533 completed and mailed to the IRS prior to the 15th day of the third month after incorporating. Newly formed corporations have 75 days from the formation date to file Form 2533 in order for a chance to obtain S corporation status for the same year.
When you are ready to file, you can use the online Florida S corp application to file and streamline the process. There you will find the free forms and general instructions, as well as access to a License Checklist and Forms Packet. You can fill out the PDF form on your computer, print and sign the form, then mail it to the Division of Corporations with the applicable filing fee. Forms are processed within two to three business days when filed online and at least three to five business days, during peak periods, when you file by mail.
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