Start a Georgia S Corp

Pros and cons of Georgia S Corporations

S Corps are unusual animals. Because of that, we thought it would be helpful to set out some pros and cons for you to weigh before settling on a Georgia S Corporation. 

Pros

Running an S Corporation can be beneficial for Georgia business owners in many ways, such as:

• Protecting your personal assets
• Eliminating corporate double taxation
• Allowing you to use the cash method of accounting

Clearly, the above benefits make an S Corp very attractive, especially if you are trying to reduce your tax footprint.

Cons

Of course, there can also be drawbacks to Georgia S Corporations, such as:

• Additional expenses for formation and maintenance
• Restrictions on issuing shares (only one class of stock is permitted)
• More extensive IRS oversight
• More stringent eligibility requirements

We hope that the above will stimulate further thoughts about how an S Corp may or may not fit into your overall business ideas. 

What to know before creating an S Corporation in Georgia

As mentioned above, Georgia S Corporations are not stand-alone business structures but rather special tax status elections made by LLCs and corporations. Below we offer a few more insights about S Corporations for your consideration.

What is an S Corporation?

An S Corporation is a special tax status defined in Subchapter S of the Internal Revenue Code. Election of the status by a small business offers certain tax advantages compared to the taxation of large companies.

The main advantage is that by electing an S corp status an LLC or corporation avoids the issue of double taxation of its business profits. In S corporations, profits get passed onto their shareholders and the shareholders pay their income tax individually.

What’s the difference between an S Corporation and a C Corporation?

First, while S Corps have IRS restrictions on the amounts and classes of shares that it issues, as well as who can be a shareholder, C Corps have virtually none.

However, the most significant difference and possibly the biggest draw, is how an S Corp’s income is treated for tax purposes.

You probably have heard of the classic C Corporation’s double tax on income (i.e., the C Corp pays income taxes at the corporate level, and then each shareholder has to pay taxes on their income from the corporation). S Corporations are free of this double tax because they pass their income to the shareholders so only the shareholders have to pay taxes on the Georgia S Corp’s income. 

What are the requirements to create an S Corporation?  

To set up a Georgia S Corporation, you first have to create a foundational entity such as a C Corp or LLC. Then you must file Form 2553 with the IRS. That said, make sure you follow the IRS guidelines before you file Form 2553.

Can LLCs choose an S Corporation election?

Yes. There’s no reason an S Corp can’t have an LLC as its foundational entity. Further, choosing to tax your LLC as an S Corporation may reduce some of your tax liabilities and thus add even more benefit to the already flexible nature of an LLC.

Learn more about LLCs and taxation on our Tax Information for Limited Liability Companies page. 

How We Can Help

Since an S Corp is simply a tax election, the true beginning point to creating a Georgia S Corp is by starting the initial business. We can simplify that part with our Georgia LLC Formation Service and our Georgia Corporation Formation Service. Once your business is established, we offer continuing support with our various business development and maintenance services. 

We can untangle all of the seemingly complex aspects of an S Corp for you. Therefore, if you want to start a Georgia S Corp, then our S Corporation Service can do it quickly and accurately. You can also look to us to assist you with the formation, maintenance, or compliance needs of your enterprise. We are here to help.