Five Easy Steps to Maintaining Your Corporate Status

1. Hold Shareholders’ and Directors’ Meetings.
2. Document Shareholders’ and Directors’ Corporate Decisions.
3. Maintain a Separation Between the Corporation and the Owners/Officers/Directors.
4. Keep Detailed Financial Records.
5. File a Separate Corporate Income Tax Return.

Does an S corp have to file a tax return?

Although perceived as a mix between a corporation and partnership, S corporations are required to file annual tax returns. Although it operates as a corporation, the business is not subject to double taxation since it is the shareholders, and not the corporation, who pay federal income tax on the business profits.

How are S corporations reported on federal tax returns?

S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates.

What happens if a C corporation does not file a tax return?

A C corporation is a general corporation — any corporation that hasn’t elected for special tax status. If this corporation files its tax return late, the penalty is not severe. It may be fined 5 percent of its unpaid tax for each month that it’s late, with a maximum 25 percent fine.

How are shareholders of a S corporation taxed?

Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates.

What do you need to know about a S corporation?

This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level. To qualify for S corporation status, the corporation must meet the following requirements: Be a domestic corporation. Have only allowable shareholders.