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In 2022 I made 224,000 (self-employed) and paid a little over 62K in federal taxes. Can I go back and amend my 2022 taxes to an S corp now?
A2A.It depends on when your LLC became active, and when you filed IRS Form 2553, Election by a Small Business Corporation, to elect S-corporaion status.If your LLC was active prior to 2022. you had to file Form 2553 by March 15, 2022. If your LLC did not become active until 2022. you had to file Form 2553 within two months and 15 days of the date the LLC became active; for example, if your LLC became active on July 1, 2022. you had until September 15, 2022 to file Form 2553.If you made a timely S-corporation election for 2022. then you must go back and both file Form 1120S for the period in which your S-corporation election was active, and amend your personal return to account for both the S-corporation income as well as any income the LLC may have earned prior to the effective date of the election. If you did not make a timely S-corporation election for 2022. then you cannot amend your 2022 returns.Note that if you made a timely S-corporation election for 2022 but did not pay yourself an appropriate salary or withhold payroll taxes in 2022. the IRS may recharacterize some or all of your net income from the S-corporation, so you might not save much, if anything.
What is a "single member S-corp"? What are the benefits of it? How is it viewed by the IRS?
An S-corp is set up after you’ve set up your single member LLC. So, first you’d set-up your LLC and then you’d complete the proper documents for the IRS. However, there are some qualifications for an S-corp to be created:The LLC must meet the qualifications of being a domestic corporation.Shareholders must meet the definition of allowable. This can be individuals, certain types of trusts, or estates. It cannot be a partnership, a corporation, or a non-resident alien.There can be no more than 100 shareholders. Since you mentioned “single member,” I am going to presume that you’re the only person involved or who would be involved on the ownership side.If you have stock, it can only be one class of stock.You cannot be an ineligible corporation. Examples of ineligible corporations include financial institutions, insurance companies, and domestic international sales corporations.You would complete Form 2553 Election by a Small Business Corporation and it must be signed by all of your shareholders. Since you said this would be single member, that should be easy enough!The IRS has the filing requirements to become an S-corp on their website. You’ll learn which form(s) to use for income tax, estimated tax, and employment tax. Before you go through with this, make sure that you really are sure that this is the best decision for your business and for you.To learn more about LLCs and S-corps and to get legal advice about your specific situation, check out LawTrades, a legal marketplace for entrepreneurs to hire and work with quality, vetted lawyers. We also have a new feature called LawTrades Micro, which allows you to ask a business attorney any question for as low as $25. In exchange you’ll receive a detailed answer within 48 hours that speaks to your situation. Hope this helps!
How can I file for an S corporation in the US for my digital media agency?
An  S corporation is the same as C Corporation from the non-income-tax   perspective. It's basically a corporation which chooses to elect (by filing Form 2553) to be  taxed as an S corporation for income tax purposes.  However, there  are requirements you have to meet, in order to be an S Corporation,  for  example, the number of shareholders cannot be more than 100, you  cannot  have partnership as the shareholder,  etc. Regarding the S corporation election, you can check here: 1.  S corporation requireents and election basics  s corporation election2.  Filing Form 2553 the right way: Filing Form 2553
How do you start an S corporation?
Hi there,Following are the steps of S Corp Formation:Step 1. Form a S corporationS Corporations are formed at the state level, typically with the secretary of state or the state division of corporations. File the appropriate formation documents in the state where the company will be located and pay the requisite filing fee.Step 2. Obtain an Employer Identification Number (EIN)After forming your company at the state level, you will need to obtain an EIN. You do this by filing Form SS-4 with the IRS. You can apply for an EIN online, by mail, or over the phone (for international applicants).Step 3. File Form 2553 with the IRSOn the IRS form, you will need to list the following information:Company nameEIN numberCompany addressState of incorporation and date incorporatedEffective date of S corp electionShareholder or member informationFiscal tax year informationOnce you file Form 2553 with the IRS, it will take approximately 60 days to receive a response letter from the IRS. Once you receive the IRS' acceptance letter, you are now officially operating your company as an S corporation.S Corp Formation can be done by going to this link.Hope this will help.Thanks
The IRS never received my S-corp filing, so now I have to file as a C-corp. How does this affect my business?
Regardless of being a C corporation or S corporation, you are incorporated.The issue only has to do with taxes. As a C corporation, your company will pay any taxes owed - assuming you will have a profit. If your company incurs an operating loss (called a net operating loss), you will owe no tax but will lose the ability to use that loss to offset future profits as long as the company files as a S corporation (beginning in 2018). The net operating loss can be carried over for up to 20 years.The filing of an S corporation return ensures that any profit or loss will be reported on Schedule K (and the K-1) so that it will flow through to your individual return (assuming you own the company personally). Profits will increase your personal tax liability and losses will reduce your personal tax liability. The only caveat on this S corp loss is that your allowable/deductible loss will be limited to your combined stock basis and debt basis in the S corp - see IRC section 1366(d) for more information on that.
What is an LLC?
If you’re thinking about incorporating your startup, you’ve probably come across advice suggesting Delaware, Nevada, and Wyoming as the best places to form your entity. Although this is true for many businesses because of certain advantages those states offer, you should be aware of whether or not those advantages even apply to you.You first need to figure out if you want to raise additional outside capital or not. The reason being, investors will prefer that you to have a C-Corp rather than an LLC due to the way they are structured. If you’re not sure yet, you can always convert your LLC when the time is right.If you go the LLC route, it’s best to incorporate in the state where you plan to operate (where you’re renting office space and where your employees reside). It’s appealing to look at the tax laws of, for example, Nevada, and think you will be able to avoid paying taxes by incorporating there. However, many people don’t realize that you will still have to register your business in the state that it's located in, regardless of where you incorporate, and that state will eventually come after your for those taxes. And, some states may even penalize you with additional taxes because you may be considered a foreign entity. There are other potential logistical hurdles and added fees to be aware of. A great example of one of the problems that may arise is the strict rules certain states have regarding opening a bank account. As an ‘out of state• business, you may need to get permission to open a business bank account. In addition, opening a bank account in the state you are incorporated in will be tough since you don’t have a physical presence there.To save you the extra paperwork and fees; go with forming your LLC in your home state. The advantages of these business-friendly states really only apply to the larger corporations with complex tax and equity situations. To find competitive prices for LLC formation, check out UpCounsel (full disclosure, I’m the CEO). There we have a roster of vetted attorneys with a wide range of experience, and an expertise in working with startups. If you’d like additional info or have more specific questions, definitely let me know, would love to help any way I can.
What kind of company?-corp or LLC would be better to open in Delaware for citizen of Ukraine who pan to arrange a software sales in the USA?
I hope you realize the “hidden” fees associated with creating an entity in Delaware. A Delaware corporation will cost you roughly $300/year in fees, plus the $100/year or so for the Registered Agent. Similar fees apply for a Delaware LLC (and you still need a Registered Agent in DE).By the way, I want to make it clear to you (and everyone reading this) that there is no such thing as a “C Corp” or “S Corp” when creating an entity. The “C” and “S” are tax classifications, not entity types. You create a corporation, and then elect to have it taxed as a c-corp (by default) or s-corp with the IRS, by filing Form 2553. The type of entity is still a “corporation” and its taxation election is either “C” or “S”.Instead of Delaware, why don’t you form an LLC in another state? For example, here’s a guide I put together for myself, back in 2013–2015, while creating entities for estate planning and taxation purposes. Pay particular attention to the “File Fee/Ann (annual) Fee” column.Choosing a state such as Idaho, where there is no annual fee (if you file your annual report online), greatly reduces your recurring costs. Even Wyoming, with its great privacy laws and low annual fees is a good choice.
What are the pros and cons of creating an LLC vs. S corporation?
A major advantage of or organizing your business as an LLC or an S corp is that you can protect your personal assets from the creditors of your business. Limited liability means you can't be financially responsible for more than your investment in the company. If you put in $10,000, and incur $11,000 in debt, you're only potentially liable for $10,000. Your creditors (check that, your LLC's creditors) can't 'pierce the corporate veil, as the phrase goes.LLC Pro's : The owner of a single member LLC doesn't have to file a tax return for the LLC, as they only report the activity on their personal tax return.Ease of Set up: Most LLC forms are only a single page for single member LLCs.Inexpensive to Start: The cost of setting up an LLC is also inexpensive, usually just a couple hundred dollars.Guidelines: The red tape involved in forming an LLC isn't as stringent as that involved with S corps, which also leads to savings on accountant and attorney fees, among others.LLC Con's : Self-employment Tax: Single Member LLC owners are required to pay self-employment tax on income generated in the LLC, which means making quarterly estimated payments to the IRS.Owners of LLCs must make sure they don't pierce the "corporate veil," meaning they have to operate the LLC separately from their personal affairs. The LLC must not be a shell but an operating entity. There have been cases where a business owner lost their protection because there was no distinct difference between the LLC and its owner.S-corp Pro's : The key advantage of an S corp is that it offers tax benefits when it comes to excess profits, known as distributions. The S corp pays its employees a "reasonable" salary, which means it should be tied to industry norms, while also deducting payroll expenses like federal taxes and FICA. Then, any remaining profits from the company can be distributed to the owners as dividends, which are taxed at a lower rate than income.S-corp Con's : S corps have more strict guidelines than LLCs. Per the tax code, you must meet the following standards to create an S corp:Must be a U.S. citizen or residentCannot have more than 100 shareholders (a spouse is considered a separate shareholder for the purpose of this rule).Corporation can only have one class of stockProfits and losses must be distributed to the shareholders in proportion to the shareholder's interest. For example, you can't have disproportionate distributions of dividends or losses. If a shareholder owns 10 percent of the S corp, he or she must receive 10 percent of the profits or losses.It costs more to form an S corp.Shareholders must adhere to the requirements at all times. If they don't, they risk disallowing the S corp election and the corporation would be treated as a C corp and its corresponding restrictions.Passive income limitation: You can't have more than 25 percent of gross receipts from passive activities, such as real estate investment.There can be additional state taxes for S corps.Shareholders should pay attention to paying themselves a "reasonable" salary for the work they perform for the S corp since the IRS is increasingly scrutinizing S corps for this.Given that it takes far less red tape to organize and is generally cheaper to administer, the LLC might be your best choice for you.Hope this was helpful, thanks.
What is the purpose of an S corporation?
Hi there,Following are the purpose and advantages of S Corporation Formation:Limited liability for management and shareholders.Unlimited number of management, no state residency requirements.Distinct, court-recognized existence, which helps protect you from personal liability than can cause you to loose your personal wealth in assets like your home, car, or nest egg.Flow-through taxation: Profits are distributed to the shareholders, who are taxed on profits at their personal level.Good privacy protection, especially in Nevada and Wyoming.Great income-splitting potential for owner/employees. Can take smaller salary and pay income taxes and regular payroll deductions, then take remainder of profit as a distribution subject to income tax only.S Corporations are great for businesses that:will provide a service (i.e. consultants);will not have significant start-up costs;will not need to make major equipment purchases before beginning operations; andwill make a sizable amount of money without a great deal of effort and expense.S corp registration can be done with this portal.Hope it will help.Thanks
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