Moving your business to an S-Corporation can ultimately provide you with many tax benefits, saving you money and other valuable company resources. It can also provide you with a high level of asset protection. To safely and smoothly retain these benefits, however, you must understand a few basic things you need to do to properly maintain your S-Corporation.
When filing to become an S-Corp you must understand your current classification. Further, there are state requirements and compliance before you file for S-Corp. Once you have done that, remember to always renew your S-Corporation each year. Every state has different fees and procedures. Thus, you should familiarize yourself with the renewal process early on. If you fail to renew your S-Corporation, it can be involuntarily dissolved and result in multiple issues.
While S-Corps offer lots of audit protection (15x as much), if you fail to file your tax returns on time and/or with an extension, there are increased chances of a business audit.
Proper and well-organized documentation is the key to maximizing the benefits of filing for S-Corporation. Before starting an S-Corp, it is important that you establish a proper payroll that is realistic and strategic for your situation. File quarterly payroll reports and making deposits based on your particular situation.
Make sure you hold your annual Shareholder and Director meetings. This is important to ensure that everyone knows what is going on, where the S-Corp is headed, and allows you to make group decisions about the future.
Clearly define what you are just an employee of your S-Corp when doing anything business-related. Make sure all of your documentation and business cards have the name of the S-Corp on them and not your own. This will protect you if your assets are in jeopardy. The S-Corp asset protection only comes when you let people know it is the “company” that is doing the business.
Protect your assets and your S-Corp by being aware of and following these simple guidelines. For more financial advice and counseling, contact Foster Financial CPA today!
Tax Tips for the Self-Employed
Everything You Need To Know About Second Draw PPP Loan
Small Businesses Are Expected To Get More Audit By IRS in 2021
Everything You Need To Know About Form 1099-NEC