What You Should Know About S Corps, Part 2

December 12, 2019 by OSYB Staff

Now that you know more about S corp status, here are some of the disadvantages of declaring S corp status as there are stringent requirements:

• shareholder pool is significantly lowered
• can’t have more than 100 shareholders
• shareholders must be US citizens, residents, or resident
• shareholders cannot be other partnerships or corporations.

Non-compliance with these requirements can lead to serious repercussions:

• S corp status immediately revoked by IRS
• three years of back-taxes from the IRS
• loss of S corp status means reapplication for S status is on hold for another five years
• because income is paid based at the individual level on personal tax returns, shareholders in a higher tax bracket will pay more in taxes

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For full article: What is an S corp? Everything small business owners need to know

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