When Should I Become An S-Corp

  1. Jameela says:

    I have been going back and forth about this. I love the way that you broke it down . Especially when we are talking numbers. Now I know when I should consider taking this step. Is the S-Corp the same as a sole proprietorship?

    • Kristin Meador says:

      Hi Jameela! Thanks for reading. The S-Corp is different than a Sole Proprietorship. See the differences below:

      Sole proprietorship – This is the default business entity. There are no formation requirements. Optional: The business owner can get a business license with their city or county.

      S-Corp – An S-Corporation must first be an LLC or C-Corporation. Therefore, they must complete the paperwork to form an LLC or Corporation with their secretary of state. From there, they need to file special election paperwork (Form 2553) with the IRS to elect the S-Corporation tax designation.
      Since they are registered as a LLC or a Corporation with their state, they must file an annual report with their state and pay a fee which costs anywhere from $25 to $500 per year depending on the state.

Leave a Reply

Your email address will not be published. Required fields are marked *

About Gradient Accounting

Gradient Accounting is a firm built with modern small businesses in mind. Our mission is to help you get your finances under control so you have time to travel, enjoy your life, and pursue your passions. Our team has more than 33 years of cumulative accounting, tax, and consulting experience. Our blog reflects our unique take on the latest news you need to know in the small business world. We are also passionate about providing free resources here to help you scale your business and earn more money in the process.