Can a Professional Corporation Be an S Corporation? (The Answer Is . . .)

Have you asked the question, “Can a professional corporation be an S corporation?” If so, you can get your answer easily here. 

You can also learn more about your options for incorporation when you book a call to speak to us here: https://molaeilaw.com/start

Table of Content


No. Content
1. Don’t Go It Alone
2. Can a Professional Corporation Be an S Corporation to Save Substantially on Taxes?
3. Can a Professional Corporation Be an S Corporation with Minimal Hassle?
4. Can a Professional Corporation Be an S Corporation if Some of Its Shareholders are Not U.S. Residents?
5. Meeting the Criteria
6. Can a Professional Corporation Be an S Corporation if Some of the Shareholders Do Not Want to Make the Change?
7. Filing the Required Form
8. All Shareholders Must Show their Legal Consent
9. Waiting on Approval by the IRS
10. What Happens Next?

 

Don’t Go It Alone

Knowing how to make the most of your business operations begins with careful planning. You cannot travel down this road alone but need to rely on the services of a dedicated and top professional business attorney. 

That is why I urge you to contact me at sam@mollaeilaw.com to consult about incorporation and to learn more about what type of corporate set-up is best for you.

Review the following information to learn more about establishing an S corporation and why this type of election is a popular choice among business start-up professionals.

 

Can a Professional Corporation Be an S Corporation to Save Substantially on Taxes?

If you are asking the question, “Can a professional corporation be an S corporation to save on taxes?” the good news is yes, it can be done.

Let us look why this is feasible.

When you incorporate as a professional corporation, you set yourself up as a traditional corporation, also called a C corporation. 

To minimize your tax burden or eliminate double taxation, you must elect S corporation status. By taking this election, you can increase your profitability and reduce the chance of operating your business in the red.

If you organize your business as a professional corporation, you should call me about opting for a subchapter S election through the IRS. 

This tax treatment allows you to operate as a pass-through entity. I can fill you in on all the details when you contact me at sam@mollaeilaw.com

 

Can a Professional Corporation Be an S Corporation with Minimal Hassle?

When you ask, “Can a professional corporation be an S corporation with minimal hassle?” you will like the answer you hear. This election can easily be facilitated, provided you work with a top business attorney. 

If you have set up a professional corporation or you plan to do so, you will establish the entity like a regular corporation. The only difference between the two is that the shareholders in a professional corporation include licensed professionals, such as lawyers or doctors.

Special liability guidelines are set up, as well, when establishing a professional corporation.

The Internal Revenue Service classifies a professional corporation a C corporation, just as it does a regular corporation, or a company that is made up of shareholders that do not hold professional licenses. Any professional C corporation may change the way it is taxed, or avoid double taxation, by choosing S corporation status through the IRS.

Once you change the filing status, your corporation will revert from an entity tax status to a pass-through designation. You will no longer pay taxes at the corporate tax rate. 

Instead, profits will pass through to individual shareholders who will report their share of the profits on their personal tax returns. You will not be taxed as an entity nor taxed again at the shareholder level when the profits are recorded as dividends. 

 

Can a Professional Corporation Be an S Corporation if Some of Its Shareholders are Not U.S. Residents?

 If you want to know, “Can a professional corporation be an S corporation if some of the shareholders are not U.S. resident?’ you have reached an impasse legally. You cannot elect subchapter S status if some of the shareholders are not U.S. residents.

Email sam@mollaeilaw.com or to book a call to speak to us here: http://mollaeilaw.com/start

 

Meeting the Criteria

To switch to a subchapter S status, your professional corporation must meet the following criteria:

  • All the shareholders must be U.S. citizens or maintain permanent residence status in the U.S.
  • The corporation can only possess one class of stock.
  • The corporation cannot have more than 100 shareholders.
  • The corporation must adopt a tax year okayed by the I.R.S., or a calendar-based tax year.

 

Can a Professional Corporation Be an S Corporation if Some of the Shareholders Do Not Want to Make the Change?

The election for a subchapter S will successfully go through, provided all the shareholders concur with the switch. If you are wondering, “Can a professional corporation be an S corporation without total shareholder consent, it cannot.

 

Filing the Required Form

The tax code requires that all, not part of the shareholders, agree to this type of election. If you have total shareholder consent, you can go ahead with a subchapter S by filing a form 2553 with the IRS. This form is titled, “Election by a Small Business Corporation.”

 

All Shareholders Must Show their Legal Consent

All shareholders of the professional corporation must sign a section of the IRS 2553 form to show their consent to the tax change. While this process is fairly simple when you have total shareholder consent, the election is not automatic.

 

Waiting on Approval by the IRS

After the form is submitted, the IRS reviews the corporation’s set-up to ensure that it is qualified. If everything falls into place, your corporation will receive a letter of approval from the IRS, endorsing the subchapter S election for a specific date.

Therefore, as you can see, electing for subchapter S takes time, but it is not an arduous process, provided your shareholders agree to the tax switch and you secure the services of a top-level legal firm. Book a call to contact us here: https://www.molaeilaw.com/start today. That is the best way to ensure that your business and tax interests are protected.

 

What To Do Next

Are you still asking, “Can a professional corporation be an S corporation?” Maybe you are not clear on some of the stipulations. If so, I can help you with any inquiries along these lines. That is why I invite you to call me at sam@mollaeilaw.com as soon as possible. 

You will need a lawyer to set up your practice and corporation, or give you advice about an already established business. If your shareholders are all residents of the U.S, and you want to avoid double taxation, I can help you realize your goals with respect to taxation. 

Sometimes a small change, such as electing for subchapter S, can mean the difference between realizing a profit at year-end, or struggling financially.

Talk to me today so you can make the most of what you spend and make. Don’t wait. Time is of the essence, especially when it comes to filing business taxes.

Email sam@mollaeilaw.com or to book a call to speak to us here: http://mollaeilaw.com/start

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