STARTING A NEW CORPORATION OR LLC-
-The first thing you need to determine is whether a C Corporation, an S Corporation or LLC would be the best way to go. You should explain the nature of the business to a CPA and get his thoughts on whether to incorporate or set up an LLC.
If you incorporate, you will need to file Form 2553 if you want to be taxed as an S Corporation. This would be done after you get your corporate charter.
After you decide between a corporation and LLC, the next step would be to get a corporate charter from the state.
After you get your charter, you need to file a form SS-4 with the IRS to get an Employer Identification number--whether you will employ anyone or not. The EIN is used by the company instead of using a Social Security Number for an individual.
You can download all forms and instructions at http://www.irs.gov
After you fill out as much as you can on Form SS-4, call the IRS at the number indicated in the instructions for the form and get the EI Number over the telephone. You can now begin filing returns under that number.
Another important point is that you may need to report both an income statement and a balance sheet on your corporate or LLC tax return. That means you may need to maintain a set of double-entry books, or get someone to do your accounting. Most CPAs do some bookkeeping work of that type (they call it write-up work). There are also many unlicensed bookkeepers who do this type of work for their clients.
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This information is not intended to be advice to the recipient. In compliance with Treasury Department Circular 230, unless stated to the contrary, any Federal Tax advice contained in this Blog was not intended or written to be used and cannot be used for the purposes of avoiding penalties.
2 comments:
What if you purchase a corporation that is a C-corp and you want to convert it to an S-corp. What do you need to do?
Hilary
If the corporation is qualified to become an S Corp; i.e. no more than 100 shareholders, only owners are individuals, etc, then any C Corporation can file to become an S-Corp whether formed by shareholders or ownership of stock was acquired by purchase by new owners from an existing C Corp
Form 2553 should be filed with the IRS and, if approved, the corporation can then be taxed as an S-Corp.
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