S-Corp Planning Attorney
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7 generations in Denton, Texas.
Corporation Planning
The S-Corporation is a tried-and-true mainstay business entity. They can be easily managed and traded so you can use your expertise to grow and attract investors at every step. Taking a wrong step setting up or maintaining your S-Corp can be disastrous.
Ownership structure, future business plans, and estate planning are the main factors in deciding how every company is run. Many business owners choose to form an S-Corp due to the federal tax benefits that this type of entity enjoys.
However, ensuring that your company remains eligible for S-Corp status and understanding the nuances that come with forming such a business can be difficult.
With the experience and skill of Texas S-Corp attorney Hunter Sargent, you can make an informed choice about how to establish your S-Corp, plan for business succession, and secure your legacy. Your next step is to call Hunter Sargent, PLLC today for a free business planning consultation.
S-Corp Basics
Corporations fall under two IRS categories: the C-Corporation or the S-Corporation. An S-Corp (colloquially, a “small corporation”) is one that has 100 or fewer shareholders who are all United States citizens. Additionally, S-Corps are not allowed to offer shares on any stock exchange and must be privately owned. All other corporations are C-Corps.
The distinction between S-Corp and C-Corp has extremely valuable tax implications; for tax purposes, the S-Corp enjoys pass-through taxation while a C-Corp does not. This means that the S-Corp entity itself is not taxed; rather, the taxes flow through to the S-Corp’s shareholders.
On the other hand, C-Corps are subject to double taxation. This means C-Corps must pay taxes on corporate income and shareholders must also pay taxes on the dividends they receive.
Because of the tax benefits that shareholders of S-Corps enjoy, property business planning is critical to business success.
How Do I Start an S-Corp?
The first step to starting an S-Corp is making sure the business name you want hasn’t been taken already. You might need to get creative with your business name or change it altogether if your first choice is taken.
The next step is filing the correct forms with the Texas Secretary of State. The forms must be filled out correctly with all of the business information, including the name and address of the company’s registered agent, the address of the company’s primary office, the company’s business purpose, etc.
There is a $300 filing fee for creating a company in Texas with very few exceptions.
After the forms have been approved and processed, you’ve done the bare minimum to create your S-Corp. However, the bare minimum is almost never the best-case scenario for business owners.
What Else Do I Need for My S-Corp?
To get the maximum protection and benefit from your S-Corp, you’ll need a business planning attorney to create a set of bylaws and, if you have business partners, a buy/sell agreement.
Poorly drafted and planned bylaws may come back to haunt you when your business takes off; Exhibit A in business disputes is almost always the company bylaws.
Hunter Sargent, PLLC is Denton’s business planning lawyer. We’ll walk you through your options, the benefits of an S-Corp, and the reasons you might want another corporate form. Our business planning strategies can be adapted to almost any estate planning strategy so you can rest easy knowing you’ve secured your legacy for generations to come.
Call Hunter Sargent, PLLC today for a free business planning consultation.
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The best time to plan your legacy was 10 years ago. The next best time is today. Everyone needs estate planning – the good news is it’s never too early and if you’re reading this, it’s not too late.
Frequently Asked Questions
S-Corp planning is the process of structuring a business to elect S-Corporation status for tax purposes, optimize distributions, and ensure compliance with IRS and Texas state rules.
S-Corps allow pass-through taxation, avoiding double taxation, and can reduce self-employment taxes through reasonable salary and dividend distributions.
Business owners file Form 2553 with the IRS to elect S-Corp status. The election must meet eligibility requirements and be approved by the IRS to receive S-Corp tax treatment.
LLCs offer pass-through taxation but members pay self-employment taxes on all profits. S-Corps allow owners to pay themselves a reasonable salary and take additional profits as distributions, reducing self-employment tax.
File Form 2553, signed by all shareholders, within 2 months and 15 days of the tax year start for current-year election. Future-year elections have specific deadlines.
Requirements include forming a Texas corporation or LLC, having eligible shareholders, one class of stock, fewer than 100 shareholders, and timely filing the S-Corp election with the IRS.
Owners must pay themselves a reasonable salary subject to payroll taxes before taking profit distributions, which are not subject to self-employment tax, helping reduce overall tax liability.
Federal Form 1120-S is due March 15, and Texas franchise tax reports are required annually. Payroll and estimated tax payments must also be submitted timely.
By separating salary from distributions, only the salary is subject to payroll taxes, while remaining profits pass through to owners without self-employment tax, lowering overall tax obligations.
Maintain proper corporate formalities, timely file federal and state taxes, follow shareholder rules, keep corporate records, and ensure reasonable salaries for shareholder-employees.
Mistakes include paying unreasonably low salaries, missing IRS filing deadlines, exceeding shareholder limits, failing to maintain corporate formalities, and misclassifying distributions.
Benefits include tax savings, liability protection, credibility with clients and banks, simplified profit distribution, and eligibility for certain fringe benefits for owner-employees.
Shareholders must be U.S. citizens or residents, cannot be partnerships or corporations, and the company can have no more than 100 shareholders with only one class of stock.
Texas imposes a franchise tax on S-Corps. Owners must comply with state filings and understand the impact of franchise taxes on profit distributions and tax planning.
Shareholder-employees must be paid a reasonable salary subject to payroll taxes. Payroll must be processed regularly with tax deposits made to IRS and Texas state authorities, ensuring compliance and avoiding penalties.
