[Verse 1] Once a C corp feeling heavy with the double tax burden There's a pathway to election, let me teach you what I've learned One hundred shareholders maximum, no corporations allowed Only individuals and trusts can join this S corp crowd One class of stock, no preferences, keep it simple and clean File Form 2553 by March fifteenth to make the dream routine If you miss the deadline accidentally, relief might come your way Inadvertent termination won't destroy your special day [Chorus] S corp magic, pass-through attraction No corporate tax, just shareholder action Pro rata shares, income flows down AAA, PTI, E&P ground Basis matters, stock and debt Distribution rules you won't forget [Verse 2] Profits and losses flow through cleanly to each owner's return Based on percentage of their holdings, this is how you'll learn Stock basis grows with income earned, shrinks when losses hit Debt basis only counts for loans you personally commit Distributions follow order, like a waterfall cascade First from AAA accumulated, then previously taxed grade Finally earnings and profits from the old C corporation days Each layer has its tax treatment in these distribution plays [Chorus] S corp magic, pass-through attraction No corporate tax, just shareholder action Pro rata shares, income flows down AAA, PTI, E&P ground Basis matters, stock and debt Distribution rules you won't forget [Bridge] Watch out for built-in gains if you converted from C status Section 1374 will tax you, don't let it frustrate us Ten years of recognition period for appreciation trapped inside Passive income over twenty-five percent might break the ride Section 1375 penalty when investment income's high Compared to partnerships, employment taxes still apply Reasonable compensation for the shareholder-employee S corp versus partnership, choose wisely what you need [Outro] Election made or election lost Convert back to C at any cost Subchapter S, the middle way Between the C corp and partnership today
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