File Scorp Election Report For Your Business DIY

File Scorp Election Report For Your Business DIY

Are you thinking about converting your company to a S-Corp? There are so many good reasons to be a S-Corp, savings on tax and capital gain to name a few.  How do you change your company to an S-Corp once you have established your company as C-Corp or LLC?

For your company to be elected as an S-Corp, it must meet all the criteria below:

1.       You are within 75 days since the first day of the new tax year, OR elect for the following year;

2.       Your company has not issued more than one type of stocks – for example, you can issue common stocks only, but not common stocks and preferred stocks;

3.       You are a domestic corporation, not owned by non-resident aliens;

4.       Your company has no more than 100 shareholders;

5.       Shareholders of your company must be individuals, estates, exempt organizations, or certain trusts.

Once your company meets all five criteria, you are now eligible to become an S-Corporation. The form you need is called Form 2553, which you can download through this link:

https://www.irs.gov/pub/irs-pdf/f2553.pdf.  

How to Fill Out Form 2553

The form is mostly self-explanatory, but here are some helpful tips you should know:

1. Most companies just need to fill out the first two pages and leave the last two pages of the form blank. The last two pages are for companies who want to use a different calendar year other than January 1 – December 31, or companies where one of the shareholders is a trust. Most companies don’t fit into that scenario.

2. Part 1 Question E, “election to be effective for tax year beginning”:

     If you just incorporated your company this year, you want to use your incorporate date here; if you have incorporated your company for over a year, you want to select January 1 as your tax year beginning.

3. Part 1 Question F:

      Calendar year: Starts on January 1. Most companies select this option since individual tax year begins on January 1 as well. Selecting the same date will make tax filing go smoother and easier for you.

4. Part 1 Question I:

     This section is for providing an explanation about why you filed late.

5. Question L:

     When writing down Question L, stock owned or percentage of ownership, only write down the shares that have been issued, not the ones you are preparing to issue but haven’t yet.

Changing to an S-Corporation is easy now that you have all the tips and tools you need at your disposal. You’ll soon be on your way to S-corporation status!

E-commerce to Quickbooks: How To Successfully Sync The Sales Data

E-commerce to Quickbooks: How To Successfully Sync The Sales Data

How To Master Real Estate Accounting in 5 Steps

How To Master Real Estate Accounting in 5 Steps