Structuring your business as an S Corporation may provide legal protections and reduce tax liabilities; however, during the initial phase and beyond it is simple to make mistakes. To maintain corporation designation, the government requires accurate adherence to regulations. Mistakes could lead to legal repercussions, revocation of S Corp status, or double taxation. Gov Doc Filing offers instructions on how to get an LLC, C-Corp, or S-Corp to lessen the risk of mistakes when applying for corporation status.
Continue reading to learn about common mistakes to avoid when forming an S Corporation:
- Not Securing Necessary Business Licenses – Most businesses must obtain some form of federal, local, or state license. These licenses are typically inexpensive and cost much less than expensive fines for operating a business without a proper license.
- Ignoring Differences in Entities – Deciding on the right corporate structure has significant ownership and tax consequences. If choosing wrong, you may be subject to losing control of your company to investment partners or being taxed twice. Consider speaking with a lawyer to determine whether an S Corp, C Corp, or LLC is better for your needs.
- Not Maintaining Your Corporation Compliance – Once the applications are submitted and your S Corp is formed, your job is not over. Your business entity must be kept in compliance.
- Incorporating in the Wrong State – Your tax burden is calculated on your you reside and operate your business. To avoid potential lawsuit and audits, small businesses incorporate in the state where the owner works.
- Not Incorporating at All – Assuming your business is too small to think about forming an S Corp is the biggest mistake to avoid. In today’s world, it is always a good idea to separate your business and personal finances.
Gov Doc Filing offers business owners a simplified form for LLC online, as well as for S-Corp and C-Corp to ensure your application is accurate.