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27Feb 2020

Do I have to make a capital contribution?

No, a capital contribution isn’t necessary. But typically you would, and should, make one. You would because there’s almost no way to start a business without some kind of investment. And you should because if your corporation or LLC is “under-capitalized”, then you could be exposing yourself and fellow shareholders or members to personal liability, […]

27Feb 2020

When is an S Corp election due?

For a corporation to be an S Corporation, the paperwork to make that effective is due no more than two months and 15 days after the beginning of the tax year the election is to take effect (yes, I copied that from the IRS instructions). If you’re really ahead of the game, then the timing […]

27Feb 2020

Can I cause my corporation to be an S Corp at the end of the year, after I see how my year has been?

You wish. But no. Congress treats this election as a go-forward business decision, not a look-back election. The good news is that it’s easy to revoke, or even “bust”, the election. But be careful about switching back and forth – as in, things don’t work that way.

27Feb 2020

I’m causing my corporation to elect to be taxed as an S Corporation. Does my spouse have to sign?

You’re going to get different answers, depending on the advisor you ask, and the state you’re in. Generally, though, best practice is yes, and sometimes required. PS – If you’re keeping this a secret from your spouse, then an S Election is not your biggest problem.

27Feb 2020

Do I need all of the shareholders’ consent for the S Corp election?

Yes. It’s really that simple. Here’s a link to the IRS page that’s chock full of info. PS – Spouses too.

09Apr 2020

How can I get my LLC to be taxed as a partnership?

Whew! A good question with a simple answer. When an LLC is formed with two or more members, it’s automatically taxed as a partnership. That’s it!

10Aug 2020

What are the downsides of using an S Corporation?

First, please take a look at this FAQ. Once you understand why you may want to use a C Corporation, you’ll understand several of the reasons that an S Corporation may not work for you. Next, other downsides include not being able to have more than 100 shareholders, and not being able to have non-individual […]

10Aug 2020

Can partners in a partnership get a W-2 and be “treated like an employee” like they can in an S Corporation?

Short answer: No. Long answer. When you turn one of your employees into a partner, that individual will switch from receiving a W-2 to getting a Schedule K-1. If you want your “partners” to be treated like an employee, then an S Corporation is the preferred approach (after you’ve determined that a C Corporation is […]

27Feb 2020

Is my business big enough to justify the additional overhead of a corporation or LLC?

“Big” is a relative term. Size isn’t always the only, or even a significant, element to determining whether you should entity-ize your business. If you run a small business, but it’s a high-risk business, like, for example, a liquor store, then the overhead of an LLC or corporation is probably not only a good idea, but […]

27Feb 2020

What are the advantages of a C Corporation versus a sole proprietorship?

Short question . . . long answer. For the most part, the classic answer, which is also correct, is a C Corporation (or an S Corporation) provides limited liability for its owners and management. Either one could provide additional tax benefits. On a less obvious level, having your business in a corporation may provide it […]

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