If you have formed a New York corporation through which you intend to conduct your new business, you should consider making a Subchapter S election. If you timely make such an election under Subchapter S of the Internal Revenue Code you will avoid the double taxation which would otherwise occur with an ordinary or C corporation. In the case of a C corporation, you pay tax at the corporate level and then again at the individual level when you receive distributions or dividends from the corporation. A Subchapter S corporation pays no tax at the corporate level; instead tax is only paid by the individual shareholder upon receipt of corporate dividends.
In order to qualify as a subchapter S corporation, the corporation must have fewer than 100 shareholders, all shareholders must be natural persons and US citizens or legal residents and there can be only one class of stock. The Subchapter S election is made by filing form 2553 with the IRS and form CT-6 with the New York State Department of Taxation and Finance.
Failure to properly elect Subchapter S treatment can expose your corporation and yourself to double taxation at the Federal and State level so consult with a knowledgeable professional when starting your New York business.
