Form an S-Corporation with pass-through taxation and IRS Form 2553 election
Request s-corp formation service and we'll walk you through it step by step.
An S-Corporation is not a separate kind of company — it's a federal tax election applied to an LLC or a corporation. The entity is formed at the state level first, then Form 2553 is filed with the IRS to elect pass-through treatment with a reasonable-salary requirement for owner-employees.
The reason people want it is self-employment tax. In an ordinary LLC, all net profit is generally subject to it. Under an S-Corp election, an owner who works in the business pays payroll tax on a reasonable salary, and remaining profit is distributed without that additional tax. That only pays off once profit reliably exceeds a defensible salary, because you also take on payroll filings and their cost.
S-Corps carry eligibility limits: a cap on shareholder count, only one class of stock, and restrictions on who can hold shares. We handle both the state formation and the election filing, and check that your dates fall inside the IRS election window.
Generally when profit comfortably exceeds a reasonable market salary for the work the owner performs, so there's meaningful distribution left after payroll — with enough margin to absorb payroll administration costs.
What you'd have to pay someone else to do your role, based on your industry, region, and hours. Setting it artificially low is a well-known IRS audit trigger.
No. Nonresident aliens can't be S-Corp shareholders, which is one of the most common disqualifiers.
Generally within two months and fifteen days of the start of the tax year you want it to apply to, with late-election relief available in defined circumstances.