What Is An S-Corporation?

Start Your Business The Right Way: Everything You Need To Know About An S-Corp

An S-Corporation is a tax classification available to qualifying LLCs and corporations, rather than a formal business entity like a C-Corporation or Limited Liability Company. It allows the foundational entity to pass its income through to its shareholders to be taxed at their personal income tax rate. In other words, an S Corporation is not a standalone business entity, but rather an election under the Internal Revenue Code that can be made by certain existing entities.

Want to find out more about S-Corporation? Please continue reading.

What is an S-Corporation? 

An S-Corporation is not a business structure or entity like a corporation or LLC, but rather a tax classification that can be applied for by either an LLC or corporation that meets the eligibility criteria. It can provide savings on self-employment taxes for LLCs and avoid double taxation for C corporations.

However, a non-U.S. international person is not able to select S Corporation tax status or become a partner in an S Corporation.

If you are interested in forming an LLC with S Corporation status, our service can assist you with the process, as well as offer additional support for running and growing your business while complying with state and federal laws. For more information on S Corporations, please see our “What Is an S Corporation?” page.

Requirements And Considerations Of S-Corps

Before discussing the process of forming an S-Corporation, it is important to understand the requirements and limitations for electing this tax classification. According to the IRS, a business must meet the following criteria in order to qualify for S Corporation status:

  • U.S. Corporation or LLC: Be a domestic corporation or LLC
  • No more than 100 shareholders/members: Have no more than 100 shareholders or members  (“shareholders” is the term for owners of a corporation, while “members” is the term for owners of an LLC)
  • Only one class of stock: Have only one class of stock
  • Must be an eligible corporation: Not be an ineligible corporation, such as certain financial institutions, insurance companies, and domestic international sales corporations.
  • No shareholders/members that are partnerships, corporations, or non-resident aliens: Have only allowable shareholders or members, which includes individuals, certain trusts, and estates. The shareholders may not be partnerships, corporations, or non-resident aliens. A non-resident alien is an alien who has not passed the green card test or the substantial presence test.

S-Corporation Benefits

There are several advantages to filing as an S Corporation, particularly for C Corporations.

Below are some of the main benefits:

Advantages of an S-Corporation Over a C-Corporation

Pass-Through Taxation

One disadvantage of traditional C Corporations is “double taxation,” where profits are taxed at the corporate level and again when they are distributed to shareholders as dividends. With an S Corporation, profits are only taxed at the individual level, similar to how sole proprietorships and general partnerships are taxed. LLCs are also taxed this way unless they choose to be taxed as a corporation.

It’s worth noting that the corporate tax rate has been lowered to 21% under the Tax Cuts and Jobs Act of 2017, so the impact of double taxation may not be as significant.

It is strongly advised that you consult with a qualified tax professional, such as a reputable accountant, to determine the best course of action for your business and specific situation.

Writing Off Losses

S Corporation owners can write off the company’s losses on their personal income statements, similar to how profits pass through to them. This can help offset income from other sources and can be helpful if the corporation loses money in the early years. However, it’s important to be aware of the IRS’s shareholder loss limitations.

Qualified Business Income Deduction

Under the Tax Cuts and Jobs Act, S Corporation owners may be able to deduct up to 20% of their qualified business income. This deduction is not available to C Corporation shareholders. Qualified Business Income (QBI) is essentially your share of the company’s profits, or the “net amount of qualified items of income, gain, deduction and loss from any qualified trade or business, including income from partnerships, S corporations, sole proprietorships, and certain trusts.” The IRS website has more information on what is and is not included in QBI.

Filing as an S-Corp 

To apply for S Corporation status, you must first establish an LLC or corporation, if you have not already done so. Then, you must file an election form with the Internal Revenue Service (IRS).

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When choosing a name for a business in the United States, it is important to consider a few key factors including availability, distinctiveness, legality and branding.

If you are setting up a Limited Liability Company (LLC) or a Corporation, you will also need to include a designator (suffix) in your business name, such as “LLC” or “INC.” This will help to differentiate your business from other types of legal entities.

Please click here to find out more.

It is not easy to determine which type of business entity, an LLC or corporation, is best for you as it depends on multiple factors such as your business goals, the nature of your business, and your individual circumstances.

If you are a U.S. person / U.S. resident please click here to find out more.

If you are a non-U.S. person / non-U.S. resident please click here to find out more.

Wyoming is a leading incorporation domicile due to low fees, no taxes, simple filing and maintenance requirements along with allowing anonymous LLCs and corporations.

For more information please click here.

If you are a U.S. resident not living in Delaware or Wyoming, the best state to form your business depends on various factors. Typically, it’s advantageous for a U.S. citizen or permanent resident to form the business entity in their home state. However, for most businesses forming a company in Wyoming is also a great choice.

If privacy and anonymity are important to you, forming a Holding Company in a state like Wyoming may be a better choice. Holding Companies can choose their domicile as they are only considered as transacting business if they engage in activities beyond holding assets and leasing them.

For further information, click here.

Common choices for a holding company (a.k.a parent company) are Wyoming, Nevada, Delaware and New Mexico. Wyoming is currently the leading state to form a Holding Company (LLC or Corporation) due to the specific statutes, anonymity, asset protection and comparatively low fees.

Please click here to find out more.

In order to incorporate in Wyoming, you need to have a company name, business address, registered agent, share count, par value, and incorporator. These are the only requirements by law to establish a corporation.

For more information please click here.

Yes, as a non-U.S. person / Non-U.S. resident / International Entrepreneur / International Founder / Digital Nomad you can form an LLC or C-Corp in the United States. In fact, it is not even necessary to physically visit the U.S.A, as it is possible to set up your LLC or C-Corp online.

Please click here to find out more.

You don’t need an SSN (Social Security Number) or ITIN (Individual Taxpayer Identification Number) to get an Employer Identification Number (EIN) from the IRS. An Employer Identification Number (EIN), also known as a Federal Tax Identification Number or a Federal Business Tax ID, is used to identify a business entity not an individual. You only need an SSN (or ITIN) if you want to apply for an EIN online with the IRS.

We have business formation packages for Non-U.S. owner(s) that includes EIN application for a discounted fee of $150. You can also hire us to obtain your EIN from the IRS for a fee of $175.

An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service (IRS) for individuals who are required to have a U.S. taxpayer identification number but who do not have, and are not eligible to obtain, a Social Security Number (SSN) from the Social Security Administration (SSA). ITINs are issued to foreign nationals and others who have federal tax reporting or filing requirements and do not qualify for SSNs.

The first step is to get an EIN from the IRS. You cannot open up a U.S. bank account without an EIN for your LLC or Corporation.

The easiest option is to opening up a business bank account online with a Fintech company like Mercury, Novel etc.

Another solution is to visit the United States yourself.

For other options and more information to open up a U.S. business bank account please click here.

Wyoming is a leading incorporation provider with low fees and no corporate income taxes. Delaware is generally only used by those raising venture capital or looking to go public.

For more information please click here.

How Triple B Business can help in starting your new company?

The fastest, easiest way to start your new company? Hire us and get everything you need: registered agent service, privacy, free mail forwarding, and the guidance of local experts.

We currently offer Business Formation Services only in the States of Wyoming and Delaware because these two great states offer multitude of advantages to new small business owners.

Here’s how you can start the process with Triple B Business today in 3 easy steps:


Tell Us Your Business Name

If you have already decided your new business name then simply enter it on our form. We will perform a free name search for you with the state.


Answer A Few Questions.

Answer a few questions and enter the required information on our business formation form. If we have any questions then we will get back to you.


We Will File Your Paperwork

We will complete your paperwork and be off to the races filing your new company with the state.

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