One of the states in the US without a state corporate income tax is Tennessee. S corporations in Tennessee must nevertheless continue to submit an annual information return to the state. S businesses are further subject to specific federal taxes on their income.
S corporations are a well-liked kind of corporate structure in Tennessee due to the advantages of pass-through taxation and limited liability protection they provide. This indicates that while the firm does not pay federal income tax, the earnings and losses are passed through to the shareholders’ personal income tax returns.
S corporations in Tennessee must submit a yearly Franchise and Excise Tax return to the state. The valuation of the company’s physical property in Tennessee or its net worth, whichever is higher, is used to determine the corporation’s franchise and excise tax due, which is based on this return.
S businesses must pay federal income tax on their net income as well. The net income of the corporation is determined by deducting its deductible expenses from its gross income. Every year, S corporations must submit Form 1120S, a federal income tax return. The corporation’s profit or loss is subsequently transferred to the shareholders’ Schedule K-1 personal income tax filings.
It’s crucial to take your company’s particular demands and objectives into account when choosing between an LLC and a S corporation. S corporations provide limited liability protection and potential tax savings, whereas LLCs give flexibility in management and taxation. It is advised that you speak with a knowledgeable accountant or attorney to figure out which structure is ideal for your company.
The Tennessee Secretary of State’s office must receive the required form before you may file an article of incorporation in Tennessee. The form must contain the business’ name and address, the registered agent’s name and address, and the names and addresses of any members or managers. Tennessee charges $50 for the filing of an article of incorporation.
Conclusion: S corporations are nonetheless subject to certain taxes and reporting obligations at the state and federal levels even though Tennessee does not have a state corporate income tax. When choosing between an LLC and a S corporation, it’s crucial to take into account the particular requirements and objectives of your company and, if necessary, consult with a skilled specialist.
You risk fines and interest charges if you don’t submit a yearly return for your S Corporation in Tennessee. The more time you wait to file, the higher and perhaps more severe the penalty. Furthermore, losing your S Corporation status could have a big impact on your company’s tax situation if you don’t submit annual filings. To avoid these repercussions, it’s critical to timely and accurately file your annual forms.