Top 5 Thing You Must Do When Becoming an S Corp

As your business grows and you move from a Single Member LLC to a S Corp, there are a few critical steps that must be done to in order follow IRS requirements and to make your yearly tax filing to go smoother.

Follow these steps below

1. Articles of Incorporation

   These Articles of Incorporation are your legal formation documents, such as IRS letter saying your EIN, the letter that shows the date your S Corp election has been accepted, and the state related documents for the applicable Sectary of State.

   
   

2. Beginning Assets and Balance Sheet

   Now that your business is an formal corporation with the S Chapter election you have increased record keeping requirements to follow. You will need to keep track of a balance sheet to accurately record your assets, liability and equity in your business.

   
   

3. Set up payroll

   Now that your business is an S Corp, there has been a formal line drawn between you as the business owner and you as an employee. Per the IRS requirements business owners are required to be on payroll as they are employees of the business as well at the owner. This is actually a useful requirement since it allows for you as the business owner to draw a regular paycheck and through the withholdings you are have your taxes withheld and not have to make estimated payments every quarter.

   
   

   If done correctly the withholdings can be adequate to cover your regular paychecks as well as any distributions that will be taken at the end of the year. Consult a tax professional for advice and help with this if needed.

   
   

4. Update your insurance

   Once your business election to an S Corp has taken affect, it is smart to reach out to your insurance providers to update any paperwork to reflect the changes made, depending on the types of insurance that might have an impact on coverage

   
   

5. Understand IRS requirements

   Now that you are a proud S Corp owner, you must understand that rules for S Corps are more strict and require more set up than before. If you have a home office and were previously taking a home office deduction for your personal use of your home, you will now need to set up an accountable plan to determine the rate and repayment schedule these payments must be made through your payroll provider and must be made withing the applicable timeline.

The same applies for all personal property that is used in your business that you will be expensing on your tax return.