Arizona S-Corporations
Many small and medium-size businesses elect to operate as an S-Corporation, or as commonly referred to as S-Corp in short (also known as “Subchapter S”). S-Corporations are separate legal entities that make an election to be taxed at their shareholder level, rather that at the corporate level, in order to avoid the double-taxation problem that C-corporations face.
As C-Corporations pay taxes on their profits once at the corporate level, and a second time when dividends are distributed to the shareholders, an S-Corp essentially allows corporate profits to pass through to the corporate shareholders, and be taxed only once, together with the shareholders’ other personal income. This is what is often referred to as the corporate double-taxation problem.
This solution to the C-Corporation double-taxation problem is perhaps the most advantageous aspect of an S-Corp over a C-Corp, and essentially allows a corporation to be taxed as a partnership, yet maintain the added protection of limited liability that a corporation and/or LLC provide its shareholders or members, respectively.
LLCs may also make an election to be taxed as an S-Corporation, and often make the election for other tax considerations (i.e. avoiding taxes on self-employees). However, in order to qualify for S-Corp status, certain requirements must be met by the entity seeking the election.
Our business attorneys assist our clients with assessing their entity’s eligibility for S-Corp status; with making the election once qualification is confirmed; and with all other incorporation procedures associated with organizing a new business entity in Arizona – corporations and/or limited liability.
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