If you hate paying corporate income taxes and then paying personal income taxes on business profits, now may be the right time for you to form an S-Corp. However, there are consequences, such as IRS scrutiny, that you must consider carefully before you make the decision. To help you decide, here are two signs now may be the right time for you to form an S-Corp:
You Qualify to Form an S-Corp
Now may be the right time for you to form an S-Corp if you meet the qualification requirements. A full list of requirements can be found on the IRS website, but some key points are the company must already be a C-Corp, have only one stock class, and have fewer than 101 shareholders.
You Have a Solid Team
While an S-Corp status comes with many guaranteed benefits from the IRS, some states tax S-Corps like C-Corps. If you think you’re ready to navigate the murky waters of your state’s corporate tax law, you need a solid team in your corner.
Moreover, industry experts can ensure you pass IRS scrutiny at tax time. For example, they can advise you on the salary you should be paying yourself. If the IRS believes you are not paying yourself a fair wage to minimize your tax burden, they will immediately revoke your S-Corp status and tax you as a C-Corp.
Contact Filejet Today
Forming an S-Corp is a great way to save money on your income taxes, both when you file annually and if you ever sell your business. However, it’s not right for every business. To learn if now is the right time for you to form an S-Corp, contact us today at Filejet to schedule a demo. We take the hassle out of corporate maintenance and filing.