For a corporation to be an S Corporation, the paperwork to make that effective is due no more than two months and 15 days after the beginning of the tax year the election is to take effect (yes, I copied that from the IRS instructions). If you’re really ahead of the game, then anytime during a tax year preceding the year you want it to be in effect. For new corporations, the tax year typically begins on a day other than January 1, unless you formed on that date. So, for example, if your corporation was formed on July 8, then the S Corp election would be due 15 days after September 7, or September 22.
Can I cause my corporation to be an S Corp at the end of the year, after I see how my year has been?
You wish. But no. Congress treats this election as a go-forward business decision, not a look-back election. The good news is that it’s easy to revoke, or even “bust”, the election. But be careful about switching back and forth – as in, things don’t work that way.
You’re going to get different answers, depending on the advisor you ask, and the state you’re in. Generally, though, best practice is yes, and sometimes required. PS - If you're keeping this a secret from your spouse, then an S Election is not your biggest problem.
Yes. It’s really that simple. Here’s a link to the IRS page that’s chock full of info. PS - Spouses too.
“Big” is a relative term. Size isn’t always the only, or even a significant, element to determining whether you should entity-ize your business. If you run a small business, but it’s a high-risk business, like, for example, a liquor store, then an LLC or corporation is probably a good idea, regardless of your revenue.
Short question . . . long answer. For the most part, the classic answer, which is also correct, is a C Corporation (or an S Corporation) provides limited liability for its owners and management. An S Corporation could provide additional tax benefits. On a less obvious level, having your business in a corporation may provide it with more “respect” in the business community, and may fend off nuisance suits.
California varies – sometimes it’s a matter of days, but sometimes, especially at the beginning of the year, it can take a couple weeks. You can always submit your documents on a rush (24 hours or even same day) basis. Other states? It really depends. Delaware’s quick.
It can, but not always. It’s not often the case that a business will put their business into an entity solely to save on taxes, although S Corporations for small businesses are frequently and legitimately used for that purpose.
There’s some paperwork . . . corporations tend to have more paperwork, which is why some people might immediately gravitate to LLCs, or nothing at all. And, yes, if you want to maintain your status as a corporation, and maintain your limited liability, don’t cut corners on the paperwork. It’s important.
If you have an existing business, then its assets and contracts should get transferred to your corporation. This can look like an assignment, or a bill of sale. There are tax considerations regarding contribution of the assets of your existing business. You may also need to notify third parties, such as vendors and landlords. A stitch in time, as they say. Paperwork is king.