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When should my S-corporation election be effective?

Santa Ana, CA |

I formed my corporation on May 1 of this year. I just got around to issuing shares to myself on June 1, 2013 (I'm the only shareholder).

I just filed my form 2553 (S-corporation election) yesterday, and one of the questions was "Election is to be effective for tax year beginning (month/year)." Since I became a shareholder on 6/1, I used that date as the effective date. Did I mess up? Should I have said January 1 instead?

Attorney Answers 3

Posted

Much depends if you wanted a "calendar year" or a "fiscal year". I am not sure your question required a month but rather a year. You will want a CPA on a go-forward basis anyway, and this would be a good first question.

The above is general legal and business analysis. It is not "legal advice" but analysis, and different lawyers may analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here.

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Posted

The instructions to form 2553 state that A corporation making the election for its first tax year should enter (a) the date of incorporation, (b) the date the corporation first had assets, or (c) the date the corporation began business.

Hope this helps.
Good luck!
Phillip M. Smith Jr.
Los Angeles Tax & Business Attorney
Licensed in the United States Tax Court
www.culvercitytaxandbusinesslaw.com
www.corporateattorney.com
www.worlclasslawyers.com
Main: 323-292-4116 ❘ Cell: 562-505-1004

THESE COMMENTS ARE NOT LEGAL ADVICE. They are provided for informational purposes only. Actual legal advice can only be provided after consultation by an attorney licensed in your jurisdiction. The answer to question does not create an attorney-client relationship or otherwise require further consultation. Mr. Smith is licensed to practice law throughout the state of California with offices in Los Angeles County. He is authorized to handle IRS matters throughout the United States, and is also licensed to practice before the United States Tax Court. His phone number is 323-292-4116 or his email address is philsmithjr@worldclasslawyers.com.

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1 comment

Michael Charles Doland

Michael Charles Doland

Posted

Thank you Mr. Smith: a better and more precise answer than mine for the Avvo asker.

Posted

Mr. Smith gave you the correct answer in terms of the dates you can select: (a) the date of incorporation, (b) the date the corporation first had assets, or (c) the date the corporation began business. You can't select January 1 of 2013 since it didn't exist on January 1 of 2013. So whether you pick May 1 or June 1 sounds fine.

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