Most corporations are taxed twice. First at the corporate level and then at the shareholder level. An S corporation -- sometimes called an S corp -- is a corporation that has elected to be taxed under Subchapter S of the U.S. Tax Code. This means that the corporation is taxed only once (at the shareholder level), just like partnerships and sole proprietorships. To file for S corp status in Tennessee, your corporation must meet certain requirements and you must submit the proper paperwork.
Determine if your corporation meets the requirements to file as a S corp in Tennessee. Your business must be a domestic corporation incorporated in Tennessee. The company must have one class of stock, meaning that no stock is inherently worth more than another stock (i.e., no stock has a higher claim on the assets and earnings of the corporation than another stock). In addition, the corporation can have no more than 35 shareholders. And all shareholders must be either individuals, estates, or trusts -- in other words, partnerships and corporations cannot be shareholders. No shareholders can be nonresident aliens.
Read More: Can a Minor Child Be a Shareholder of an S Corporation?
Obtain consent from the shareholders to S corp status. A corporation cannot file as a S corp without unanimous shareholder consent.
Navigate to the Forms and Instructions section of the Internal Revenue Service website and click "Form 2553."
Fill out Part I of the form. The form is self explanatory. However, there are some items to note. The Employer Identification Number asked for in box A is your corporation's EIN. If your corporation has applied, but not received an EIN, type "applied for." Box K must include the signatures of every single shareholder who owns or will own stock at the time the election is made.
Fill out Part II of the form. Note that Part II need only be completed if you selected a tax year ending on any date other than December 31.
Fill out Part III of the form. Note that Part III is applicable only if one of the shareholders of your corporation is a qualified Subchapter S trust. A qualified Subchapter S trust has only one income beneficiary, who is a U.S. citizen or resident, and all income of the trust is required to be distributed to only one income beneficiary.
Print out and mail the entire form to:
Internal Revenue Service 324 25th St. Ogden, UT 84401
Certain domestic corporations are ineligible to file as S corps. These include a member of an affiliated group of corporations, a domestic international sales corporation, a corporation that takes the Puerto Rico and possessions tax credit, a bank, or an insurance company taxed under Subchapter L of the Internal Revenue Code.
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