Ohio S Corporation Taxation; How does it work?

Forming an Ohio S corporation allows the company to pass corporate income, losses, deductions and credits through to the shareholder’s tax return. The company’s shareholders then account for this income and losses on their personal tax returns. Income tax is then paid at the shareholder’s personal tax rate.

How is an S corp different from a C Corp?

This process of taxation is unlike a traditional, C Corporation. With a C Corporation, there is tax paid at the corporate level at the corporate rate; then again at the individual’s personal rate.

Can your company be an S Corporation?

There are specific IRS qualifications necessary to become an S-corp. Those include:

–       Location of corporation = Must be in the United States

–       Types of Shareholders = Must be individuals (including some trusts/estates)

–       Limitation on the number of Shareholders = Must be less than 100

–       Class of Shareholders = Unlike a C Corporation or LLC there can only be one class of stock

Even if you achieve the subchapter S status, it is possible for an auditor with the IRS to re-categorize your company as a C Corporation; if the above qualifications are not met. This would cause an assessment on the unpaid corporate taxes.

About the Author

Elliott Stapleton

Elliott is a partner in the firm of Cornetet, Meyer, Rush and Stapleton serving clients throughout Ohio. Elliott's business clients range from small single member companies to large privately-held businesses. CMRS Law provides legal services which include advice on Business Formation and Transactions, Real Estate Transactions, Trademark Law, Copyright Law, Estate Planning, Trust Administration, Probate Administration, and Succession Planning. CMRS Law serves clients at two locations: 123 Boggs Lane, 1st Floor, Cincinnati, Ohio 45246 and 2101 Grandin Road, Suite A, Cincinnati, OH 45208