Initial S-Corp Setup (1 Viewer)

[Shula-holic]

I'm setting up a S-Corp for my business this year for the first time.  Even though my background is accounting and finance, I have a question for anyone who has started one.  When you started the S-Corp, how did you do your initial balance sheet and from what date?  For tax purposes, this corp is being "born" this year so I'm assuming I can begin it from January 1, 2016.  It would basically only begin with the ending inventory from prior year and a note payable to owner in my mind in that scenario.  The question then would be, what to do about sales and COGS that occurred in 2016 prior to the new EIN being established, could the vendors who send 1099-K then list all payments to the new EIN for the entire year on their reporting?

 

[McGarnicle]

Happy to help, I just have one question: what exactly is an "S-Corp"?

 

[Bucky86]

Happy to help, I just have one question: what exactly is an "S-Corp"?

It means a ####ty corporation.

 

[Abraham]

Why an S?  The filings are much more cumbersome than an llc and transitioning later when needed isn't that hard. 

 

[ChainsawU]

I'm setting up a S-Corp for my business this year for the first time.  Even though my background is accounting and finance, I have a question for anyone who has started one.  When you started the S-Corp, how did you do your initial balance sheet and from what date?  For tax purposes, this corp is being "born" this year so I'm assuming I can begin it from January 1, 2016.  It would basically only begin with the ending inventory from prior year and a note payable to owner in my mind in that scenario.  The question then would be, what to do about sales and COGS that occurred in 2016 prior to the new EIN being established, could the vendors who send 1099-K then list all payments to the new EIN for the entire year on their reporting?

You might be putting the cart ahead of the horse. Just use the date that is printed on your certificate of formation. If it is Jan 01, then yeah. Have them do it that way. I think technically you have a couple months after your taxes are even due next year to apply for/obtain your EIN in the first place. That's just a reference number. Use, and have your vendors use, the date the state/feds officially recognized you as a LLC, partnership, S-Corp, or whatever, as your official start date.

 

[ChainsawU]

Why an S?  The filings are much more cumbersome than an llc and transitioning later when needed isn't that hard. 

An LLC can operate as an S-Corp. Those aren't mutually exclusive. An LLC is what the state designates it as. S-Corp, C-Corp, Partnership, Sole Proprietorship, etc.. is the federal government's designation.

 

[ChainsawU]

Also - just a heads up, S-Corps whose tax year ends on 12/31 - their taxes are due on 03/15.

 

[Shula-holic]

You might be putting the cart ahead of the horse. Just use the date that is printed on your certificate of formation. If it is Jan 01, then yeah. Have them do it that way. I think technically you have a couple months after your taxes are even due next year to apply for/obtain your EIN in the first place. That's just a reference number. Use, and have your vendors use, the date the state/feds officially recognized you as a LLC, partnership, S-Corp, or whatever, as your official start date.

Good info, thanks.  So if it's anything other than January 1, the total year's sales and cogs wouldn't then appear on the corps return?  That's an accounting nightmare due to timing issues if the case, but just simply needs to be done so if it comes to that we can make it happen.  .  

 

[Shula-holic]

An LLC can operate as an S-Corp. Those aren't mutually exclusive. An LLC is what the state designates it as. S-Corp, C-Corp, Partnership, Sole Proprietorship, etc.. is the federal government's designation.

This is what we are doing.  LLC that operates as an S-corp.  

 

[ChainsawU]

Have you formed the LLC yet? If not then you may be screwed as I believe the "back dating" of an LLC formation can only go back 75 days (and forward 12 months) from whenever you submit the form. If you haven't formed it yet it won't be that bad of a nightmare as you'll have time to plan for it, at the very least. I'm just not sure how far along in this process you are.

 

[TheMagus]

Yea. I think you should probably just apply for the S-Corp (no idea where you are with this) and start your books on the date the S-Corp becomes official. I remember it taking at least a couple of weeks to get everything set up so you will have a bit of time to plan and establish starting balances, etc.

As someone else already posted, if you are dating this back to Jan 1, which I'm not even sure is acceptable by the government, you missed the first quarter's tax returns. Trying to sort that all out seems like much more of a PITA than having your S-corp become an entity on, say, June 1, and starting fresh from there. Your 2016 tax returns will be fun, but it's only one year and I think it's probably the path of least resistance. 

 

[Shula-holic]

Have you formed the LLC yet? If not then you may be screwed as I believe the "back dating" of an LLC formation can only go back 75 days (and forward 12 months) from whenever you submit the form. If you haven't formed it yet it won't be that bad of a nightmare as you'll have time to plan for it, at the very least. I'm just not sure how far along in this process you are.

Initial phases, just spoke to the attorney today

 

[Shula-holic]

Yea. I think you should probably just apply for the S-Corp (no idea where you are with this) and start your books on the date the S-Corp becomes official. I remember it taking at least a couple of weeks to get everything set up so you will have a bit of time to plan and establish starting balances, etc.

As someone else already posted, if you are dating this back to Jan 1, which I'm not even sure is acceptable by the government, you missed the first quarter's tax returns. Trying to sort that all out seems like much more of a PITA than having your S-corp become an entity on, say, June 1, and starting fresh from there. Your 2016 tax returns will be fun, but it's only one year and I think it's probably the path of least resistance. 

This is why I've resisted for as long as I have going this route, but the losses in SE tax are past the point of acceptable anymore.  I used to tell myself the expense of the filings, the legal work, etc would offset it, but that's not reality.