Does an Idaho S Corporation Require A Reasonable Wage?
Yes. Even though an Idaho S-Corporation uses a pass-through taxation method, owners/shareholders are able to differentiate between a wage and a disbursement. However, a reasonable wage must be paid out to those working in the business before any disbursements are paid out to other owners/shareholders. This reasonable wage must have been paid on a W-2 with employment taxes paid.
A reasonable wage is best determined by the replacement cost of that position on the open market.
If the Idaho S-Corporation profited $58,000 this year and a reasonable wage is $75,000, then all $58,000 must be paid as the reasonable wage. Until the reasonable wage has been met, no disbursements can be made and all profits will be subject to additional self-employment taxes.
Does an Idaho S Corporation Provide Owners with Shares of Stock?
Yes. An Idaho S-Corporations can issue one class of stock with a maximum number of 100 shares.
Does an Idaho S Corporation Have a Perpetual Existence?
Yes. An Idaho S-Corporation has a perpetual existence that can outlive its original owners/shareholders.
Does Idaho S Corporations have Strict Ownership Rules?
Yes. An Idaho S-Corporations are very strict about who can become an owner/shareholder. In addition, this business entity can only issue one class of stock with a maximum of 100 shares.
Idaho S-Corporations are known for very strict owner/shareholder rules, but it can own almost anything other than another S-Corporation itself.
- U.S. citizens
- Permanent residents
- Single-member LLCs
- Qualified sub-chapter S trusts
- Testamentary trusts created by a will
- Grantor trusts
- Bankruptcy estates
- Revocable trusts created as part of an estate
Does an Idaho S Corporation Have Flexible Tax Reporting?
No. If your business is formed as an Idaho S-Corporation, then there is no other taxation option available.
However, the IRS does not have a separate taxation category for Idaho LLCs. This allows the LLC members to elect at their own discretion a form of taxation that makes the most sense for their business. An Idaho LLC can elect to be taxed as an Idaho S-Corporation, but not the other way around.
Does an Idaho S Corporation Owner Pay Self-Employment Taxes on All Profits?
No. An Idaho S-Corporation can differentiate between W-2 wages and disbursements paid after a reasonable wage has been met. In the Idaho S-Corporation, W-2 wages and employment taxes are an expense to the company. Any profits thereafter are distributed, and taxes are paid as ordinary income on each owner/shareholders’ tax return.
Does an Idaho S Corporation Pay Idaho State Taxes?
Yes. Idaho has a corporate income tax, as well as certain special taxes applicable to an Idaho S corporations and LLCs. In addition, if income from your Idaho business passes through to you personally, that income will be subject to taxation on your personal Idaho tax return.
Idaho S corporations are required to pay a minimum tax of $20. An additional tax of at least $10 is required if the S corporation owes federal tax on excess net passive income or net recognized built-in gains.