Must-know Compliance Tasks After setting up an S-Corp

Are you a real estate investor, borrower, or lender who recently set up an S-Corporation (S-Corp)? You’ve taken a significant step towards achieving your real estate business goals. By forming an S-Corp, you’ve separated your personal and business assets, reduced your tax liability, and provided yourself and your shareholders with limited liability protection. However, it’s important to understand that compliance with laws and regulations is crucial for the success and legal operation of your S-Corp.

In this article, we’ll cover the must-know compliance tasks after setting up an S-Corp and provide specific steps for each task. Whether you’re new to the world of S-Corps or a seasoned pro, you’ll benefit from this comprehensive guide to ensure your business is compliant with laws and regulations that govern S-Corps. By following these must-know compliance tasks, you can maintain the tax benefits and limited liability protection of your business and avoid costly mistakes.

Visualize the Thing You Just Did

Congratulations on setting up your S-Corp! You’ve taken a significant step towards achieving your real estate business goals. By forming an S-Corp, you’ve separated your personal and business assets, reduced your tax liability, and provided yourself and your shareholders with limited liability protection. However, to maintain these benefits and ensure your business’s success, you need to comply with laws and regulations that govern S-Corps.

What Comes Next?

After setting up an S-Corp, you need to perform the following must-know compliance tasks:

1. Obtain and Maintain Licenses and Permits

Before you start operating your S-Corp, you need to obtain the necessary licenses and permits at the federal, state, and local levels. These licenses and permits vary depending on your business activities, location, and industry. Examples of licenses and permits you may need include:

• Business license
• Zoning permit
• Building permit
• Occupational license
• Professional license
• Sales tax permit

After obtaining these licenses and permits, you need to renew them on time and update them as necessary. You also need to display them in your business location as required by law. Failure to obtain or maintain the necessary licenses and permits can result in fines, penalties, or even the closure of your business.

Specific Steps:

Step 1: Research and Obtain the Necessary Licenses and Permits

Research the licenses and permits required for your business activities, location, and industry. Contact the relevant federal, state, and local agencies to obtain the licenses and permits.

Step 2: Renew Licenses and Permits On Time

Set up a reminder system to renew licenses and permits on time to avoid fines and penalties.

Step 3: Display Licenses and Permits in Your Business Location

Display the licenses and permits in a visible location in your business location as required by law.

2. File Taxes

As an S-Corp, you need to file an annual tax return with the Internal Revenue Service (IRS) using Form 1120S. You also need to provide each shareholder with a Schedule K-1, which reports the shareholder’s share of the corporation’s income, deductions, and credits. Failure to file your taxes accurately and on time can result in penalties and fines.

Specific Steps:

Step 1: Determine Your Tax Year

Choose your tax year, which can be either the calendar year (January 1 to December 31) or a fiscal year (any 12-month period).

Step 2: File Form 1120S and Schedule K-1

File Form 1120S and provide each shareholder with a Schedule K-1 by the due date, which is usually March 15 for calendar-year corporations.

Step 3: Pay Taxes On Time

Pay any taxes owed on time to avoid penalties and fines.

3. Maintain Separate Business and Personal Finances

As an S-Corp, you need to maintain separate bank accounts, credit cards, and financial records for your business and personal finances. Mixing these finances can result in loss of limited liability protection and legal and tax consequences.

Specific Steps:

Step 1: Open a Separate Business Bank Account

Open a separate bank account for your business finances to track income, expenses, and profits.

Step 2: Use Separate Credit Cards for Business and Personal Expenses

Use separate credit cards for business and personal expenses to avoid confusion and ensure accurate record-keeping.

Step 3: Keep Accurate Financial Records

Keep accurate financial records for your business and personal finances, including receipts, invoices, and bank statements.

4. Hold Annual Meetings and Document Important Decisions

As an S-Corp, you need to hold annual meetings of shareholders and directors and document important decisions made during these meetings. This helps demonstrate compliance with laws and regulations and provides evidence of corporate control and management.

Specific Steps:

Step 1: Schedule and Hold Annual Meetings

Schedule and hold annual meetings of shareholders and directors, and document the date, time, location, and attendees.

Step 2: Discuss and Document Important Decisions

Discuss and document important decisions made during the meetings, such as electing directors and officers, approving bylaws and policies, and declaring dividends.

Step 3: Keep Meeting Minutes and Records

Keep meeting minutes and records in a secure and accessible location, and retain them for the required amount of time, which varies by state and federal laws.

5. Issue and Record Stock Certificates

As an S-Corp, you need to issue stock certificates to each shareholder and record the issuance in your corporate records. This helps demonstrate compliance with securities laws and regulations and provides evidence of ownership for shareholders.

Specific Steps:

Step 1: Choose a Stock Certificate Template and Customize It

Choose a stock certificate template and customize it with your corporation’s information.

Step 2: Print and Sign the Stock Certificates

Step 3: Record the Issuance of Stock Certificates Record the issuance of stock certificates in your corporate records, including the date, number of shares, shareholder name and address, and any restrictions or conditions.

How Important It Is?

Compliance with laws and regulations is essential for the success and legal operation of your S-Corp. Failure to comply can result in fines, penalties, legal and tax consequences, and even the revocation of your S-Corp status. By following the must-know compliance tasks after setting up an S-Corp, you can maintain the tax benefits and limited liability protection of your business and avoid costly mistakes.

How Setting Up an S-Corp Can Be Used for Maximum Effect?

As a real estate investor, borrower, or lender, you can use the must-know compliance tasks after setting up an S-Corp to:

• Maximize the tax benefits and limited liability protection of your S-Corp, which can save you money and protect your assets.
• Attract investors who are interested in the tax benefits and limited liability protection of an S-Corp.
• Ensure compliance with laws and regulations that govern S-Corps, which can help you avoid fines, penalties, legal and tax consequences, and even the revocation of your S-Corp status.

Final Words

As a real estate investor, borrower, or lender, you can use the must-know compliance tasks after setting up an S-Corp to maximize the tax benefits and limited liability protection of your business, attract investors, and ensure compliance with laws and regulations. By prioritizing compliance in your business operations, you can avoid costly mistakes and achieve your real estate business goals.

Now that you have a clear understanding of the must-know compliance tasks after setting up an S-Corp, it’s time to take action. Review your current compliance status and identify any gaps or areas for improvement. Then, follow the specific steps we provided for each task, and prioritize compliance in your business operations. By doing so, you can maintain the tax benefits and limited liability protection of your S-Corp and avoid costly mistakes.

Don’t forget, compliance is essential for the success and legal operation of your S-Corp. So, what steps will you take to ensure compliance with your S-Corp? Share your thoughts and plans in the comments below.