Louisiana S Corporation: Everything You Need to Know
A Louisiana S corporation is a corporation that is legally registered to operate within the state. This type of corporation elects for different taxation than a C corporation, which is the standard formation of a corporation in Louisiana. 3 min read
Louisiana S Corporation
A Louisiana S corporation is a corporation that is legally registered to operate within the state. This type of corporation elects for different taxation than a C corporation, which is the standard formation of a corporation in Louisiana. Upon forming a corporation in the state, it will automatically exist as a C corporation unless you take steps to transition it to become an S corporation. Louisiana S corporations benefit business owners who prefer a more formal business structure, limited liability, and pass-through taxation of profits.
An S corporation is a standard corporation operating in the state of Louisiana that has filed a form with the IRS to elect a different tax status than what applies to a C corporation. The election form for an S corporation can be filed as soon as the corporation has been formed or any time after forming the business. All business owners who wish to incorporate in the state of Louisiana must follow all statutes and rules related to corporation formation. In order to form a corporation, you must file the Articles of Organization with the Secretary of State.
After forming the corporation under state laws, the next step to form an S corporation is filing the required form with the IRS to be taxed under IRS code subchapter S. The IRS election form is recognized by the majority of states, but you may need to complete a state election form and file it with a copy of the status of taxation as an S corporation on a federal level.
Although S corporations can exist in the state of Louisiana and take advantage of the federal taxation changes, the state will still tax and treat the business as a standard C corporation. Some states require the business profits to be taxed on a corporate level as well as a shareholder level, which is referred to as double taxation. In these states, both S corporations and C corporations are double-taxed on any profits that have been paid out to shareholders as dividends.
Other states will only require taxation of a portion of the S corporation's profits. The state of Louisiana does not offer a way to elect for taxation as an S corporation on a state level. Instead of offering a form or way to elect for different taxation treatment, the state requires all corporations to prepare and file their state taxes every year in the same manner as C corporations. The shareholders of either type of corporation can make pass-through tax elections that will offer similar benefits to states that recognize election as an S corporation.
Conversion Between Corporation Types
S corporations can convert back to C corporations if they file a formal IRS request. However, this conversion process has some rules. C corporations can't convert back to S corporations within five years of completing the conversion. Additionally, a C corporation must maintain the December 31 fiscal year, which is a requirement for S corporations.
S Corporation Treatment
Both C corporations and S corporations operating in Louisiana are recognized and treated as legal entities, separate from its owners or shareholders. A corporation can be treated like a human being that exists separately from those who own it. Shareholders of S corporations can take advantage of limited liability for obligations and debts incurred by the company. Any liability as the result of legal action would be limited to the assets of the business and would not extend to the personal assets of the shareholders.
Shareholder asset protection is a main advantage of choosing a corporation structure for your business. A shareholder typically cannot be responsible for more than they have invested in the business. Additionally, shareholders aren't liable or responsible for debts if a corporation files for bankruptcy. If someone takes legal action against the corporation and wins the case, only the property owned by the corporation would be eligible to satisfy the outstanding judgment.
Even if the corporation doesn't have enough property to satisfy the judgment, the courts couldn't seize personal assets of the shareholders to cover the remainder. These personal assets include:
- Personal bank accounts
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