Can an S-Corp have one owner in Texas?

In Texas, an S-Corporation may have just one owner. A corporation that is taxed under subchapter S of the Internal Revenue Code is known as an S-Corporation, or S-Corp for short. As a result, the shareholders of the S-Corp receive the income, deductions, and credits, which they then record on their personal tax returns. The S-Corp itself does not pay income tax.

The rigorous qualifying rules for S-Corporations, which include a cap of 100 shareholders and support for just one class of stock, may be a drawback. Additionally, no corporation or partnership may be a shareholder; all shareholders shall be citizens or residents of the United States.

The first step in starting an S-Corp in Texas is to register as a C-Corporation with the Texas Secretary of State. The corporation must next submit Form 2553 to the IRS in order to choose S-Corp status. The creation of bylaws, having the inaugural board of directors and shareholder meetings, receiving an employment identification number (EIN) from the IRS, and obtaining any relevant licenses and permissions are further prerequisites for establishing an S-Corp in Texas. The IRS mandates that the owner-employee be paid a fair wage for services done to the corporation when assessing a reasonable salary for S-Corp owners. This pay should be on pace with what a non-owner in this role and sector would receive. Any additional revenue, however, may be sent to the owner as a dividend that is not subject to self-employment tax.

The ability of an LLC to possess an S-Corp is subject to several restrictions. All members of the LLC must be qualified S-Corp shareholders and the LLC must be treated as a partnership or disregarded entity for tax purposes. The LLC is also limited to a maximum of 100 members.

To sum up, an S-Corporation in Texas is permitted to have just one owner, but there are stringent qualifying conditions and additional actions that must be taken. It’s crucial to figure out what an S-Corp owner should be paid, as well as any restrictions that may apply when an LLC owns an S-Corp. A skilled accountant or lawyer can assist in ensuring compliance with all specifications and rules.