FAQ

An S Corporation election is a tax designation that allows a qualifying business entity to be treated as an S Corporation for tax purposes. This election provides certain tax benefits, including pass-through taxation and potential tax savings.

Some key advantages of electing S Corporation status include:

• Pass-through taxation: Business profits and losses pass through to the shareholders' personal tax returns, avoiding double taxation.
• Potential tax savings: By paying yourself a reasonable salary and distributing remaining profits as dividends, you can potentially reduce self-employment taxes.
• Limited liability protection: An S Corporation provides limited liability protection to its shareholders.

To elect S Corporation status, you must meet specific eligibility requirements and file Form 2553 with the IRS. Our S Corporation Election package includes handling the paperwork and ensuring all necessary forms are accurately completed and submitted on time.

To be eligible for S Corporation election, your business must meet the following criteria:

• Be a domestic corporation or eligible limited liability company (LLC)
• Have only allowable shareholders, including individuals, certain trusts, and estates
• Have no more than 100 shareholders
• Have only one class of stock
• Not be an ineligible entity, such as certain financial institutions, insurance companies, or international sales corporations

A reasonable compensation analysis is an assessment of the salary or compensation paid to a shareholder-employee in an S Corporation. The IRS requires shareholder-employees to receive a "reasonable" salary based on their roles and responsibilities within the business. Our package includes a comprehensive analysis to ensure your compensation is in compliance with IRS guidelines.

Yes, our S Corporation Election package includes payroll set up assistance using Gusto, a popular and user-friendly payroll software. We will guide you through the process of setting up payroll, ensuring compliance with tax regulations and smooth payroll management.

Please make note there will be an additional fees associated with Payroll. Gusto charges a monthly fee of appx $45/month and you will have the initial set up fee to register with your State which is a one time fee of appx $199-400. Fees are based on your State.

The included one-hour consulting session provides an opportunity for personalized guidance and support. You can discuss specific concerns, ask questions related to S Corporation election and its implications, and receive expert advice tailored to your business needs.

To be eligible for S Corporation status for the current tax year, the deadline to file Form 2553 with the IRS is generally March 15th of that year.

If you miss the deadline to file an S Corporation election for the current tax year, you may be eligible for relief through late election relief provisions. We will assist you with this!

Determining if your business is ready for an S Corporation election depends on various factors, including:

• Profitability: S Corporations are generally more beneficial for businesses that generate substantial profits to take advantage of the tax savings. A ballpark range is appx $50k net profit from your business. Net Profit means Income minus Expenses.
• Shareholder compensation: If you can establish a reasonable compensation plan for shareholder-employees, an S Corporation can be advantageous.
• Future growth plans: If you anticipate growth and increased profitability, an S Corporation can provide tax flexibility and protect your personal assets.

To maintain an S Corporation, you must fulfill certain annual compliance requirements, including:

• Filing an annual tax return: S Corporations must file Form 1120S annually, reporting the business's income, deductions, and credits. This means you will have 2 tax returns: Form 1120S due generally March 15th of each year AND Form 1040 due generally April 15th of every year.
• Payroll and employment taxes: Ensure proper payroll management and compliance with federal and state payroll tax requirements. (Gusto will take care of this!)
• We will discuss all compliances in our Consulting Session