Jones and Turner are interested in possibly changing the structure of their business to an S Corporation and would like to know more about this entity. They are excited by the fact that the S Corporation is a “flow through entity” and the fact that they don’t pay income tax.
They also heard that if they pay themselves dividends as S Corporation shareholders, they won’t have to pay any Social Security or Medicare tax (payroll taxes).
Prepare a memorandum for the business owners using a minimum of 800 words explaining the following;
- What are the requirements for structuring a business as an S Corporation?
- Discuss at least two advantages to structuring a business as an S Corporation
- Explain how income from the S Corporation taxed; include in your discussion on taxation of S Corporation income, the forms (including their names and numbers) utilized in reporting income and paying tax to the IRS.
- Finally, explain to the business owners what the requirement is for corporate officers who work in their own S Corporations.
