NEW YORK--(BUSINESS WIRE)--Businesses that elect to file under Subchapter S of the Internal Revenue Code are known as “S Corporations” – and they may be in for a significant advantage come tax season. However, maintaining S Corporation status requires careful adherence to a series of compliance and reporting obligations, noted a Wolters Kluwer CT Corporation expert during a new episode of the company’s recently launched CT Expert Insights podcast.
Tim Jensen, Manager of Customer Service at CT Corporation, discussed some of the common benefits that S-Corporations share with other types of formal business entities, such as easier access to capital, the ability to deduct business expenses and limited liability protection for the owner’s personal assets. But an S Corporation’s largest appeal may be its eligibility for pass-through taxation, whereby a company pays no corporate tax on profits or losses.
“Instead those profits and losses are passed through and reported on the owner’s individual tax returns. Any tax due is then paid by the owners at their individual tax rate, not the corporate tax rate,” Jensen said.
Still there are some potential drawbacks to consider as well. For instance, companies seeking to become an S Corporation must comply with a stringent litany of qualifications, including a strict limit of 100 shareholders. Entities in the vein of financial institutions or insurance companies may also be barred from obtaining S Corporation status altogether.
Businesses that do qualify as an S Corporation will need to closely monitor state-by-state due dates for filing annual statements and franchise taxes. Jensen noted that CT Corporation provides services to help companies manage their initial and ongoing business obligations.
“We can assist with all the related filings to get your S Corporation properly set up and more importantly keep it in compliance going forward,” he said.
For more than 125 years, Wolters Kluwer CT Corporation has been the leading provider of registered agent services, incorporation services, and legal entity compliance. It is part of Wolters Kluwer’s Governance, Risk & Compliance division and has a global reach into over 150 countries. More than 75 percent of Fortune 500 companies, 95 percent of AmLaw 100 law firms, and 350,000 small businesses trust CT Corporation to handle their compliance needs.
About Wolters Kluwer Governance, Risk & Compliance
Governance, Risk & Compliance is a division of Wolters Kluwer, which provides legal and banking professionals with solutions to help ensure compliance with ever-changing regulatory and legal obligations, manage risk, increase efficiency, and produce better business outcomes. GRC offers a portfolio of technology-enabled expert services and solutions focused on legal entity compliance, legal operations management, banking product compliance, and banking regulatory compliance.
Wolters Kluwer (AEX: WKL) is a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. Wolters Kluwer reported 2020 annual revenues of €4.6 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,200 people worldwide.
