S Corporation

How to use S Corp tax basis

By stock basis, I mean an owner’s tax basis in their ownership of a S corporation.  For historical reasons the owners are assumed to be shareholders who own stock in a true corporation.  The S election was originally designed for true corporations, as an opportunity to turn the default double tax treatment of C Corporations into “flow…

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How to setup your S Corporation loan

You’ve elected S.  Now you have to make sure you keep that status.  Maintaining your S status is matter of continuing to meet the qualification criteria, each and every day of the tax year.  One of the criteria that tends to garner the most attention is keeping your corporation to “one class of stock,” of…

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4 Top Tax Issues when electing S for your C Corporation

If you already have a business that files as a C corporation, electing S, isn’t technically a “taxable transaction.”  I mean the actual act, of filing an S election doesn’t have an tax associated with it.  Electing S for your C corporation isn’t even a transaction, in the traditional sense.  You aren’t contributing anything new to the company,…

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3 Reasons your business could lose its S election

Did your business make an election to be treated as an S Corporation for tax purposes?  Here a few gotcha’s that can terminate your election if you aren’t careful.  The tax law standard is that you have to meet the qualifications of being an S Corporation on everyday of the tax year.  What qualifications?  The…

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How to file a late S Corporation Election

It’s S Election filing season!  The stated due date to file an S Election for this tax year is March 15th.  An S Election is made to convert your business into an S Corporation that generally doesn’t pay federal income tax but instead flows the income through to the owners, who pay the tax on their individual…

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How loans to your S Corporation can improve your taxes

S Corporation owners often loan money to their S Corp to finance growth or keep things afloat during hard times.  Loaning funds to your S Corp is often easier and more flexible than just making a capital contribution.  This is especially true if the capital infusion is only intended to be short-term.  It’s easier to…

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What the IRS considers a reasonable cost

What is reasonable compensation?  That is a common question raised for privately held companies where owners are working in the company as employees.  Legally the owner has the power to control the amount paid to them for compensation but this power comes with additional tax scrutiny.  This is true for both the double taxed Corporation and the…

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Is incorporating your S Corporation taxable?

In this article I’ll tackle the scenario where you are forming a new business and want it to be an S Corporation.  If you have an existing Corporation or LLC and want to elect S, check out my previous LinkedIN article, Can your business be an S Corporation?  This previous article also lays out the general…

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Does your S Corp have C Corp issues?

There are several tax gotcha’s that come up when you have an S Corporation that was previously operated as a C Corporation.  One of the issues to consider is how distributions are taxed.  In my previous article, Are S Corp distribution taxable, I covered the basic rule.  Distributions in excess of your stock basis are…

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When are S Corp distributions taxable?

Not all S Corporations are subject to the same rules when it comes to this question.  How distributions from your S Corporation are treated may depend on its history.  Did your S Corporation ever operate as a C Corporation? Or, was your business designed to be an S Corporation right from formation?  In this article…

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