Corporate Transactions
S-Corporation
•
An S-Corporation is a hybrid business entity. It is a separate legal entity and generally offers liability protection to its owners (shareholders).
•
An S-Corporation must register with the California Secretary of State before conducting business operations and file the appropriate paperwork.
•
An S-Corporation must create bylaws (e.g., how the corporation will operate) that cover items such as shareholder meetings, director meetings, number of officers, and their responsibilities.
•
A corporation must elect to be treated as an S-Corporation and is limited to 100 owners (shareholders).
•
The S-Corporation pays a reduced tax rate on its net income (currently 1.5 percent in California).
•
The profits and losses "flow down" from the S-Corporation to each shareholder through the Schedule K-1. Each shareholder is responsible for paying taxes on his or her distributive share.
•
Based on the corporation's separate legal entity status, the owners of the S-Corporation are not liable for the losses of the business and creditors may only look to the corporation and their business assets for payment.
•
A separate bank account and separate records are required for the S-Corporation.
•
The owners have ultimate control of the S-Corporation, but must elect directors who in turn elect officers for the company. The directors make the major decisions, while the officers make the day-to-day decisions.
•
An S-Corporation must pay a minimum franchise tax of $800 to operate in California.
Copyright © 2008 Law Offices of Rozy Lahlouh Boulos. All Rights Reserved.
Legal Disclaimers:
This website and the contents contained herein are to be used solely for informational purposes. The contents of this website are not to be considered legal advice. Neither this website, nor access to or receipt of the information therefrom, is intended to create or constitute an attorney-client relationship. This website is not intended as a substitute for legal counsel, and no one should act upon any information contained in this website without seeking the advice of legal counsel.