Small Business Development Guide
Sub-Chapter S-Corporation Taxes
You can elect S-corporation status within 90 days of forming the corporation by filing FORM 2553 with the IRS. If you do not file for S-Corporation status, you will be taxed as a regular C-corporation. Unlike the C-corporation, S-corporation income profits and losses are passed on to the shareholder. Profits are taxed only at the shareholder level; the corporation pays no income taxes (single taxation). There are other restrictions with an S-corporation such as a maximum number of shareholders and the way your health care costs can be deducted, so you should consult an accountant and an attorney before selecting S-corporation status. The taxation details for an S-corporation are as follows:
- For Federal Income Tax, file FORM 1120S for informational purposes only, due annually. Contact the IRS at 1-800-829-1040.
- Corporate Franchise Tax (State of Ohio Income Tax) is filed for informational purposes only on FORM IT-1040 annually. Call the State of Ohio at 1-800-282-1780.
- Corporation pays Local/Municipal Income Tax based on net profits of the business and the shareholder gets credit for his/her individual income tax return. File Schedule E. Contact your local tax department for more information.
- Shareholders pay Income Tax on the dividends from the leftover profits of the business on their own individual income tax returns.