Many small businesses form S-Corps because they combine the benefits of a partnership with the benefits of a C-corporation. Unfortunately, the state the S-Corp is operating in can dissolve the S-Corp if certain annual maintenance steps aren’t completed. To prevent your S-Corp from being dissolved involuntarily, make sure to follow these three steps yearly.
1. Create Annual Reports
To maintain your status as an S-Corp and keep all the benefits provided to C-Corps, you must create annual reports like any other company would. This means that you must have year-end financial reports, including Statement of Cash Flow, Profit and Loss Statement, Balance Sheet, and Statement of Owners’ Equity. You must also hold annual meetings with minutes to prove that meetings actually took place.
2. Pay the State
Another critical annual maintenance step is to pay the annual registration fee to the state and file any paperwork your state requires for you to maintain your status. For example, in California, you must pay the minimum franchise tax of $800 during the first three months of your accounting period. Additionally, any net income earned during the first year will be taxed at a rate of 1.5%.
3. File a Corporate Tax Return
Finally, you must file a corporate tax return annually. Unlike a personal income tax return, a corporate tax return is due on March 15th and takes longer to file. Whether you are tasking an employee with filing your corporate tax return, or you’re hiring a CPA, follow up weekly on his or her progress and make sure you file an extension request with the state and federal governments if there is any doubt the return will be completed on time.
Schedule a Demonstration Today
Running a business is hard enough without having to worry about gathering, processing, filing, and maintaining all of your financial records. We can help with that. To schedule a demo, contact us at Filejet and discover how we can help you keep your S-Corp status and take a little off of your plate.