November 24, 2020
S corporations can provide tax advantages over C corporations in the right circumstances. This is true if you expect that the business will incur losses in its early years because shareholders in a C corporation generally get no tax benefit from such losses. Conversely, as an S corporation shareholder, you can deduct your percentage share of these losses on your personal tax return to the extent of your basis in the stock and any loans you personally make to the entity.
Losses that can’t be deducted because they exceed your basis are carried forward and can be deducted by you when there’s sufficient basis. Therefore, your ability to use losses that pass through from an S corporation depends on your basis in the corporation’s stock and debt. And, basis is important for other purposes such as determining the amount of gain or loss you recognize if you sell the stock. Your basis in the corporation is adjusted to reflect various events such as distributions from the corporation, contributions you make to the corporation and the corporation’s income or loss.
Adjustments to basis
However, you may not be aware that several elections are available to an S corporation or its shareholders that can affect the basis adjustments caused by distributions and other events. Here is some information about four elections:
Contact us if you would like to go over how these elections, as well as other S corporation planning strategies, can help maximize the tax benefits of operating as an S corporation. © 2020
People do lots of things during the summer—take vacations, grill in the backyard, attend ball games and go to the beach, among other pursuits.
Businesses with multiple owners generally benefit from a variety of viewpoints, diverse experience and strategic areas of specialization. However, there’s a major risk: the company can be thrown into tumult if one of the owners decides, or is compelled by circumstances, to leave.
The next quarterly estimated tax payment deadline is June 15 for individuals and businesses so it’s a good time to review the rules for computing corporate federal estimated payments. You want your business to pay the minimum amount of estimated taxes without triggering the penalty for underpayment of estimated tax.