You're an S-Corp, Now What? | Steps to Take After Becoming an S Corporation

so you followed everyone's advice and converted your business to an s corporation but did you know you still need to follow strict financial requirements or you run the risk of losing your s corp status all together i don't want that to be you so please be sure to stay tuned for this entire video so you can successfully maintain your s corporation [Music] hey guys i'm crystal cpa at life accounting and in today's video i am going to break down everything you need to know about maintaining your s-corporation or escort but before i do please do me a favor and like this video and go ahead and subscribe to our channel so you don't miss out on another tax and wealth building video now if you're one of the many entrepreneurs that has converted their llc partnership or sole proprietorship to an s-corp you probably did so for the following reasons one to significantly reduce self-employment taxes self-employment tax is a 15.3 percent tax on your business income regardless of if you took distributions from your business or not for s corporations self-employment tax is only paid on the salary you pay yourself as an employee of the business but not only this your business may also be an s corporation for the asset protection shareholders in an s corporation have limited liability protection over their personal assets so now that your business is an s corporation there are a few items you need to do in order to keep your s corp status and the first thing you need to do is make sure you're paying yourself a reasonable compensation i'm sure you've heard of this concept before when you first decided to be taxed as an escort but according to the irs reasonable compensation is the value that would ordinarily be paid for like services by like enterprises under like circumstances more simply it is the compensation other businesses in your industry would pay you to do your job responsibilities some s-corp owners may try to pay themselves as little as possible in compensation in order to minimize their self-employment tax exposure however paying yourself a reasonable compensation is the cardinal role of an s corporation if you want to learn more about reasonable compensation and how to figure out what exactly is a reasonable compensation please let me know in the comments all right being that you need to pay yourself a reasonable compensation as an s corp owner this also means you need to make sure you're filing your quarterly and annual payroll taxes starting first with your quarterly payroll taxes form 941 must be filed at the end of every quarter with the irs those due dates are april 30th july 31st october 31st and january 31st for the previous quarter and on form 941 is where you report the total wages and payroll taxes paid for each employee in the business including yourself so even if you are the only employee in your s-corporation you still must file form 941 reporting the wages paid to you from the business and the taxes that were withheld now every year you need to file form 940 which is simply the annual version of form 941 form 940 reports all of the wages paid and taxes withheld for the entire year this form is due january 31st do keep in mind that even if wages were not paid in a particular quarter or year you still need to file zeros on these forms you should think of the irs as sort of like having a car even though the check engine light may not be on you still want to make sure to get your routine oil changes so that the car keeps running and working well you know what i mean so even if nothing is going on in your business you still need to do routine maintenance on it to keep it going and in good standing i hope that made sense while we're on the payroll track here as an s-corp paying wages you would also be required to prepare and file forms w-2 and w-3 if you've ever worked for someone else in the past then you've received a w-2 from them around tax time you would need to do the same thing for yourself as an s-corp owner slash employee form w-2 shows general employee information plus the total wages and taxes paid during the year and again even if you are the only employee in your s-corp you must still file form w-2 form w-3 is a summary of all of your employee wages it provides an overview of the w-2 forms and is filed with the w-2s the social security administration uses form w-3 as a way to reconcile that all wages were reported and all of the necessary fica taxes have been reported as well also i should mention that there are state versions of these payroll forms so it is important to file those as well so while we're still talking about required forms and filings as an s corporation you need to also make sure that you file its annual tax return form 1120s this form is due every single year on march 15th and you use form 1120s to report the s corporation's income and expenses if march 15th rolls around and you're not ready to file form 1120s you can always file an extension on form 7004 this will extend the due date to file form 1120s by six months or by september 15th being that you need to file all of these tax forms and keep track of wages paid it is a good idea to have some kind of bookkeeping system in place as well as an s-corporation one that organizes all of your income and expense categories like wage expense taxes advertising rent and other expenses you can take as write-offs on the tax return this will make filing your tax returns and wage reports much easier in addition to that it is important to have a separate business checking account so that it is clear that business funds are only being used for business and not for personal expenses s corporation owners can find themselves in big trouble with the irs if there is not a separate business account for just the business because ultimately the irs does not want you to co-mingle business and personal funds so please consider having a separate business account for your s-corporation in addition most states require some kind of annual report or fee to be paid and in georgia this fee is actually fifty 50 but it's likely to be different in your state definitely be sure to learn what your state's fee is and pay it every year even if the company did not make any money you don't want the state to automatically dissolve your business meanwhile you're thinking you still have a company on record you should be able to find out this information on your state's secretary of state website under the business section all right that's all i have for this video i hope you enjoyed and will consider commenting your thoughts below make sure to check out some of our other videos and i'll see you in the next one [Music] you

Channel: LYFE Accounting

Views: 20,652

Keywords: lyfe accounting, s corporation, s corp, how to maintain an s corp, s corp compliance

Id: Cpx0tbOeboI

Length: 8min 4sec (484 seconds)

Published: Thu Sep 16 2021