S Corporation – What Is It?Written by Richard A. Chapo
For many small businesses, “S” corporation is business entity of choice. The “S” in S corporation refers to a tax designation. All corporations are created same way under state law. A small business must then chose a tax status, to wit, “C”, “S” or non-profit. Important issues concerning S corporations are covered in this article.
C Corporation v. S Corporation
Federal tax laws automatically consider every corporation to be a “C” designation. A small business, however, may elect to be designated as an “S” corporation by filing IRS form 2553. The election must be made prior to tax year in which it is going to be effective. All shareholders must sign election.
A C corporation stands alone for tax purposes. It must file tax returns and pay taxes on profits. Profits and losses are reported on corporate tax return and do not pass through to shareholders. C corporations can elect any calendar month as end of their fiscal year.
An S corporation is a pass through entity for tax purposes. It does not file a tax return for purpose of paying taxes, but does file information returns. All profits and losses are passed through to shareholders. In turn, each shareholder reports profit or loss on his or her individual tax returns in proportion to their ownership interest. For instance, if you own 30% of total issued shares, 30% of profits or losses must be reported on your personal tax returns. S corporations must have a fiscal year-end of December 31. If you intend to eventually take your business public, you cannot use an S corporation.
40 Million Credit Card Numbers Stolen – Failure To EncryptWritten by Richard A. Chapo
CardSystems Solutions moronic security efforts have resulted in potential theft of information for 40 million credit cards. Hackers were able to install a rogue program, probably a Trojan, in CardSystems security network. This program captured credit card information including cardholder’s name, account number and verification code.
CardSystems Solutions is an Atlanta-based company. Prior to this incident, it processed approximately $15 billion dollars in credit card transactions each year. Small businesses were primary users of system. The FBI and MasterCard International have launched investigations into hack. It has become apparent CardSystems Solutions should be charged with gross negligence. The company failed to comply with MasterCard security regulations and failed to destroy information of cardholders after prescribed time periods.
In a matter of gross incompetence, CardSystems failed to encrypt any of credit card data for users. This is equivalent of your bank sending monthly account statements will all information printed on outside of envelope. It is simply inexcusable and has led to potentially biggest theft of financial information in history.