The IRS is your best source for tax related questions. https://www.irs.gov/
To avoid double taxation on the corporate income of a small business, the company must complete and submit Form 2553 “Election by a Small Business Corporation”, to the IRS requesting the IRS to approve the company for S Corporation status. (See below for further information on the S Corporation election).
S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.
To qualify for S corporation status, the corporation must meet the following requirements:
In order to become an S corporation, the corporation must submit Form 2553 Election by a Small Business Corporation (PDF) signed by all the shareholders. See the instructions for Form 2553 for all required information and to determine where to file the form.
Click here for further information from the IRS: https://www.irs.gov/businesses/small-businesses-self-employed/s-corporations
Charities and Not-For-Profits
Tax Exempt Organizations
To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operatedexclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual. In addition, it may not be an action organization, i.e., it may not attempt to influence legislation as a substantial part of its activities and it may not participate in any campaign activity for or against political candidates.
Organizations described in section 501(c)(3) are commonly referred to as charitable organizations. Organizations described in section 501(c)(3), other than testing for public safety organizations, are eligible to receive tax-deductible contributions in accordance with Code section 170.
The organization must not be organized or operated for the benefit of private interests, and no part of a section 501(c)(3) organization's net earnings may inure to the benefit of any private shareholder or individual. If the organization engages in an excess benefit transaction with a person having substantial influence over the organization, an excise tax may be imposed on the person and any organization managers agreeing to the transaction.
Section 501(c)(3) organizations are restricted in how much political and legislative (lobbying) activities they may conduct. For a detailed discussion, see Political and Lobbying Activities. For more information about lobbying activities by charities, see the article Lobbying Issues; for more information about political activities of charities, see the FY-2002 CPE topic Election Year Issues.
One sure way to gain access to opportunities to obtain contracts with government agencies or private corporations is to get certified as a Minority/Women Owned Business Enterprise. Not only will your company be notified of bidding opportunities, your business will also be included in the online directory of certified businesses from which corporations seeking minority suppliers look for products and services. Talk to us about your certification goals, let us help you with the paperwork.
NEW BUSINESS CHECKLIST:
Creating a checklist of all the startup requirements of your new company is a sure way to ensure all corporate formalities are met and your company is off to a health start.
Click on the attached list to access our new business checklist. Feel free to customize to your company’s needs: (new business checklist)
For a guide to creating a budget for your startup costs click here: (startup budget)