Electing S corporation status, setting a reasonable salary, tracking basis, fixing a late election, and deciding whether the election still pays at your profit level.
36 guides, each written by a CPA licensed in the US and Canada.
C-Corp vs. S-Corp comparison: S-Corp advantages: - No double taxation. Income is taxed once at the shareholder level. - SE tax savings.
Small Business & BookkeepingC-Corps face double taxation but offer unlimited shareholders, stock classes, and venture capital compatibility. Compare LLC, S-Corp, and sole.
Small Business & BookkeepingA C-Corp pays 21% with double taxation on distributions. An S-Corp passes income through to the owner's personal return with no entity-level tax.
Small Business & BookkeepingC-Corps pay a flat 21% corporate tax (TCJA rate, made permanent) with double taxation on distributions (qualified dividends taxed at 15-20%).
Small Business & BookkeepingA C-Corp pays a flat 21% corporate tax rate, then shareholders pay tax again on dividends (double taxation). but they are taxed completely differently.
Small Business & BookkeepingMost small businesses benefit from S-Corp status, but C-Corps offer advantages in specific situations: retaining earnings at 21%.
Small Business & BookkeepingConverting from C-Corp to S-Corp triggers the built-in gains (BIG) tax under IRC 1374 on appreciated assets sold within 5 years.
Small Business & BookkeepingConverting from a sole proprietorship to an S-Corp requires forming an LLC or corporation, then filing Form 2553 to elect S-Corp status.
Small Business & BookkeepingConverting a single-member LLC to S-Corp taxation involves filing Form 2553 (Election by a Small Business Corporation) with the IRS.
Small Business & BookkeepingConverting a C-Corp to S-Corp triggers the built-in gains (BIG) tax: a corporate-level tax on appreciation that existed at conversion.
Small Business & BookkeepingConverting to S-Corp requires filing Form 2553 (due March 15 for calendar-year businesses). Conversion mechanics: Step 1: Ensure you have an LLC.
Small Business & BookkeepingConverting a sole prop to an S-Corp mid-year requires forming the entity, filing Form 2553, transferring assets. Compare LLC, S-Corp, and sole.
Small Business & BookkeepingLLC to S-Corp conversion mechanics: 1. Form 2553 (Election by a Small Business Corporation). Filed with the IRS to elect S-Corp tax treatment.
Small Business & BookkeepingThe IRS can reclassify S-Corp distributions as wages if the owner's salary is unreasonably low. The IRS requires S-Corp shareholder-employees to pay.
Small Business & BookkeepingMissed the March 15 S-corp election deadline? Revenue Procedure 2013-30 offers late-election relief if you file within 3 years and 75 days.
Small Business & BookkeepingAn LLC is a legal structure (liability protection), not a tax election. An S-Corp reduces self-employment tax. Compare LLC, S-Corp, and sole.
Small Business & BookkeepingS-corp owner-employees must pay themselves a reasonable salary before taking distributions. How the IRS determines the number and what triggers audits.
Small Business & BookkeepingS-Corp owners must pay themselves a reasonable salary before taking distributions. Every S-Corp owner who performs services for the business must.
Small Business & BookkeepingS-Corp shareholders who perform services for the corporation must pay themselves a reasonable salary before taking distributions.
Small Business & BookkeepingThe S corp late filing penalty is $255 per shareholder per month, up to 12 months, for returns due in 2026 ($245 in 2025). It applies even with $0 tax due. How abatement works.
Small Business & BookkeepingS-Corp shareholders must track their stock and debt basis to determine the deductibility of losses, the tax treatment of distributions.
Small Business & BookkeepingAn S-Corp election (Form 2553) must be filed by March 15 of the tax year to be effective for that year (or within 2 months and 15 days of formation.
Small Business & BookkeepingThe S-corp election changes how a business is taxed without changing its legal structure. Form 2553 deadlines, requirements, and late-filing relief.
Small Business & BookkeepingMissed the March 15 deadline for S-Corp election? Rev. Proc. 2013-30 allows late filing if (1) the entity intended to be an S-Corp.
Small Business & BookkeepingS-Corp owners who perform services for the corporation must pay themselves a 'reasonable compensation' as W-2 wages before taking distributions.
Small Business & BookkeepingSetting reasonable compensation for an S-Corp owner-employee is the most important tax planning decision for an S-Corporation, and pay that's too low can be reclassified as wages.
Small Business & BookkeepingHow the IRS determines reasonable compensation: The IRS uses the factors from *Revenue Ruling 1974-44* and the *Watson v. Commissioner* line of cases: 1.
Small Business & BookkeepingS-Corp owners must pay themselves a reasonable salary before taking distributions. Too low risks IRS reclassification, too high wastes the FICA savings.
Small Business & BookkeepingThe IRS requires S-Corp owner-employees to pay themselves a 'reasonable salary' before taking distributions. Too low lets the IRS reclassify distributions as wages.
Small Business & BookkeepingThe IRS requires S-Corp shareholder-employees to pay themselves a reasonable salary before taking distributions. Compare LLC, S-Corp, and sole.
Small Business & BookkeepingThe IRS requires S-Corp owner-employees to pay themselves a reasonable salary before taking distributions. Too low lets the IRS reclassify distributions as wages.
Small Business & BookkeepingThe IRS evaluates S-Corp reasonable salary using industry benchmarks, experience, hours worked, and comparable wages. Covers key rules, filing.
Small Business & BookkeepingEvery S-Corp shareholder must track two separate accounts that determine the tax treatment of distributions and the deductibility of losses.
Small Business & BookkeepingS-corp shareholder basis determines whether distributions are tax-free or taxable. How AAA, OAA, PTI, and the ordering rules work in practice.
Small Business & BookkeepingS-Corp shareholders must track their stock basis and debt basis separately. Distributions exceeding basis are taxable as capital gains.
Small Business & BookkeepingA side-by-side comparison of tax treatment for sole proprietors, single-member LLCs, and S-Corps at three income levels.