Subchapter S Corporation

Subchapter S Corporation in Los Angeles

There are certain business organizations in Los Angeles that would like to cut costs in their taxation. This is actually possible since the Internal Revenue Code (IRC) allows some corporations to elect not to pay corporate income taxes – provided they meet the requirements of being a subchapter S corporation. Since the net profit or net loss is flowed through the shareholders of the corporation, taxation would depend on each individual profit.

To become a registered subchapter S corporation, your company must:

  • Be a legal entity, either a corporation, a partnership or a multiple-member limited liability corporation, with no more than 75 members;
  • Have a group of shareholders who are U.S. citizens;
  • Have only one class of stock; and
  • Have shareholder agreements between all shareholders which would allocate the profit proportionately to each person’s own interest in the enterprise.

Another clear advantage of being a subchapter S corporation is that each investor is more involved with the taxation since the profits are flowed individually. This usually leads to bigger tax savings.

In the State of California, however, there are certain things to ponder if you’re deciding to register your business as a Subchapter S or a limited liability corporation. Depending on how your company declares its gross revenues, additional taxes such as franchise tax will be added on top of your net income tax.

Registering your company as a subchapter S corporation will require further paperwork because you have to prove to the Secretary of the State that your business entity meets the Subchapter S, Chapter 1 of the Internal Revenue Code.

Subchapter S Corporation in Los AngelesIncidentally, our business lawyers from the Business Corporate Attorney can help you file the paperwork on your behalf so you can focus on setting up your business. We’ve been helping many enterprises draft bylaws and agreements that create good partnerships and corporate relationships for over 15 years.

Call us today at (888) 833-2528 or send us an e-mail at, and let our expert Los Angeles business lawyers help you register your business entity.

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