Here’s CorpNet’s latest press release about the March 15 deadline to elect S Corp status.
For a corporation filing taxes, March 15 is a critical tax deadline. But for a small business owner who has incorporated a business as a C Corporation or a Limited Liability Company (LLC), March 15 is also an important deadline, as it’s the last day to elect S Corporation status for the 2013 tax year.
“If you miss the deadline, you’ll most likely be taxed as a C Corporation for the current tax year, and then your S Corporation election will be effective for the following tax year,” said Nellie Akalp, CEO of CorpNet.com, “The IRS may give you a pass if you can show that your failure to file on time was due to a ‘reasonable cause.’ Of course, no one wants to be at the mercy of the IRS, so play it safe and get your form in on time.”
Choosing the right business structure for your small business can seem like a daunting task. After all, the decision can have a pretty significant impact from how much you pay in taxes to how much paperwork you need to contend with. As such the March 15th deadline for existing businesses to elect S Corporation status is the perfect time to examine this business entity and whether electing the S Corporation status is the right choice for your small business.
What is the S Corporation?
The S Corporation actually begins as a general, for-profit C Corporation. After the corporation has been formed, it may elect ‘S Corporation Status’ by filing Form 2553 with the IRS in a timely manner (more on the deadline below…). With this S Corporation election, the company is now taxed as a sole proprietor or partnership rather than as a separate entity like the C Corp. This means that corporate profits and losses are “passed-through” and reported on the personal income tax returns of the shareholders. That’s why the S Corp is known as a “pass-through entity.”
An S Corporation is comprised of shareholders. Its members receive dividends allocated in accordance with the number of shares each holds. One of the greatest advantages of this business structure is that it allows profits to be distributed to owners in lieu of wages. This way, owners avoid paying separate federal taxes on company profits and personal wages.
If you have an existing Corporation (C Corporation) or an LLC, March 15th is your deadline to file IRS Form 2553 with the IRS and to elect S Corporation status for this tax year and future tax years. If your corporation or LLC existed on Jan 1, 2012, you need to file form 2553 by March 15, 2013 in order to have your S Corporation election effective for the 2013 tax year. However, if you form a Corporation or LLC on June 1, 2013, then your S Corporation deadline is August 15 (75 days from June 1).
The right business structure for your small business will ultimately depend on all the unique aspects of your business. But regardless of which business type you choose, taking a serious look at your legal structure is creating a strong foundation for your business and CorpNet.com is here to help you every step of the way!