Lesson 10 of 11
Common mistakes and when to get advice
Most S corporation problems fall into a short, predictable list.
Frequent errors
- Taking distributions without paying any salary
- Setting the salary implausibly low
- Filing Form 2553 after the deadline and assuming it applies anyway
- Admitting an ineligible shareholder, including a non-resident owner
- Making distributions out of proportion to ownership, which can look like a second class of stock
- Electing while profit is too small to cover payroll and accounting cost
- Overlooking a state that taxes S corporations at entity level
When to get professional advice
Before electing, before admitting a new owner, before changing your salary substantially, and before operating in a new state. Each of those can affect eligibility or the economics of the election.
This course is educational and does not constitute tax advice for your situation. Decisions about elections and compensation should be reviewed by a qualified tax professional who knows your numbers.
Not sure whether the election fits?
The numbers depend on your profit, your role in the business and your state. Gullia Filing's tax team reviews your position, prepares Form 2553 where it makes sense, and sets up payroll so the election holds up.