If you do business in CT you may want to set up an S-Corp for tax benefits. However, you must understand the requirements that come along with it.

Most CT business owners will find that the best reason to start an S-Corp is for tax savings, specifically self-employment tax (Social Security and Medicare), which has a rate of 15.3%. A CT S-Corp business owner pays Social Security and Medicare on their S-Corp salary which may be significantly less than the business income that the self-employment tax would be paid on if the tax status is not set up.


 CT S-Corp Requirements


Not every business can become a CT S-Corp though. You first need to have an entity, such as an LLC, and register your business with the CT Department of Revenue Services.

The CT Department of Revenue Service also requires that you be taxed as an S-Corp at the federal level which involves submitting a request to the IRS. If approved the IRS will send you an S-Corp acceptance letter confirming your status.

The S-Corp tax status also means that you must meet the following requirements:

  • Must be a U.S. corporation
  •  Must have no more than 100 shareholders
  • All shareholders must approve the S-election
  • Shareholders must be U.S. citizens or U.S. persons (certain trusts, estates or non-profits may also be shareholders)
  • Profits and losses must be allocated based in proportion to shareholder’s interest
  • Only one class of stock is allowed
  • Must be a small business corporation, per IRC section 1361

S-Corp Compliance


Once you get approval to be taxed as an S-Corp you need to operate like one. Maintaining compliance means keeping separate books and records for your business, minutes of your corporate meetings and filing of corporate taxes.

You will also need to file a separate S-Corp tax return with the IRS as well as a corporation business tax return with the CT Department of Revenue Services. The normal IRS due date for an S-Corp operating on a calendar year is March 15. The CT Department of Revenue Services requires that the S-Corp file their return by the fifteenth day of the month following the federal return’s due date.

Failure to submit these tax returns on a timely basis can lead to serious penalties

Need to file your CT S-Corp tax return or need to get an S-Corp set up for your business? Contact us.