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Re: Converting 'C' corp to 'S' Jul 23, 2008 10:20 AM
That is a very common mistake. When you incorporate as an entity, the default will be a C-corp. In order to have and S-corp an election for small business status should be made by filing form 2553. The best scenario is to file the incorporation and Form 2553 all at the same time to avoid any problems.
However, this does not seam to be your scenario. You can use what is called rev-proc to make a late S-election up to two years after incorporating. After the two years the IRS is very unforgiving that you forgot to make the election that far back.
If you have recently incorporated then you can just file the Form 2553.
Remember when you file the Form 2553 and/or make the late election to consider if you are in a community property state or not. There are only 5. If you are a community property state make sure the spouse also signs the Form 2553. You do not have to assign any share but must account for them.
Also watch for any state ramification on making the S-Election. It will usually require a state return during tax time as well.
This answers your initial question but you may have more after reading this post. Please let me know if I can assist you further.
My telephone number is (817) 481-3784. Email
dawezell@verizon.net. Or just reply back to this post.
Thanks and much luck.
