Name: Tobi Li Marshall CPA, APC
Address: 100 Barranca Street Suite 737, West Covina, CA, 91791
Telephone: (626) 858-2037

S-Corp Election Package

We can help you become an S-corp | $900 One Time Fee

Call Us Today! (626) 858-2037

We are your S-corporation CPAs in California

An S-Corporation (S-Corp) is a small business corporation which allows the shareholder(s) to only be taxed at individual level for Federal tax purposes. S-Corps have different tax treatments compared to Sole Proprietorships and C-Corporations. Moreover, S-Corps also have unique requirements regarding compensation to officers and the treatment of debt between the corporation and shareholders. If you are making a net profit (after expenses) of more than $30,000 per year, you should consider forming an S-Corp. This way you will pay less taxes overall versus filing as a Sole Proprietor and paying self-employment taxes on all your net income.

At Tobi Li Marshall CPA, APC, most of our clients are S-Corp owners. As Certified Public Accountants in California, we are aware of the unique tax treatment of S-Corps at the both state and local level. Our firm provides a one-station service that provides our S-Corp clients with incorporation, bookkeeping, tax planning and payroll services.

Advantages and Disadvantages of S-Corp

There are useful benefits to having an S-Corp. For example, you can take nontaxable dividends from your S-Corp. However, if you don’t follow the S-Corp rules, such as taking a nontaxable distribution, but not issuing yourself a reasonable salary, you may hear from the IRS.

Here is an example of an S-Corp’s estimated possible tax savings:

Let’s say you are a self-employed business owner whose net income is $100,000 for the year. Just to clarify, net income is what you get after you subtract your expenses from your gross revenue. You would need to pay about $15,300 ($12,400+$2,900) in Self-Employment Taxes (aka SE Tax) on top of your Federal income tax. This is a lot of money!

Now let’s say next year you get smarter and decided to form a S-Corp. As an S-Corp shareholder employee, you are required to pay yourself a reasonable salary (determined by you). Assuming same facts as our previous example, your net income becomes $60,000 ($100,000-$40,000). Now you will ONLY have to pay $6,120 in SE Tax. Your tax saving is $9,180! In this scenario, you save over $9,000 in taxes by simply incorporating a correct business entity.

The downside of filing as an S-Corp:

S-Corps cannot have more than 100 shareholders. Furthermore, no shareholder may be a nonresident alien and S-Corps can have only one class of stock.
There is additional paperwork and fees involved. It is necessary to incorporate your business by filing Articles of Incorporation with your state, obtain a registered agent for your company, and pay the appropriate fees. Many states also impose ongoing fees, such as annual report or franchise tax fees.
You will need to deal with payroll. S-Corp owners are required to pay themselves a “reasonable salary” as employees and that salary is subject to payroll taxes.

We can help you become an S-Corp!

Deciding to become a S-Corp is a challenging and important decision that strongly consider. At Tobi Li Marshall CPA, APC, we can help you determine if becoming an S-Corp is the right decision for your business at this time. If you do decide that becoming an S-Corp is right for you, we will use all our experience and expertise to help you navigate all the legal hurdles to make your business an S-Corp.

Call Us Today! (626) 858-2037

S-Corp Formation