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motlow19
New Member

Do Partners in an S-Corp all need to open their own S-corp or can it be filed under a principal partner who then 1099's off the S-corp?

 
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2 Replies
rjs
Level 15
Level 15

Do Partners in an S-Corp all need to open their own S-corp or can it be filed under a principal partner who then 1099's off the S-corp?

An S corp does not have partners, it has owners or shareholders. (A partnership has partners.) An S corp is one corporation. It is a distinct legal entity, separate from the owners. There is only one S corp, no matter how many owners there are. The S corp has to file its own tax return (Form 1120S). Part of the S corp's tax return is a Schedule K-1 for each owner. Each owner enters the information from the Schedule K-1 in his or her personal Form 1040 tax return.


You should probably sit down with a local tax professional who can guide you in how to handle the taxes for your S corp.

Anonymous
Not applicable

Do Partners in an S-Corp all need to open their own S-corp or can it be filed under a principal partner who then 1099's off the S-corp?

definitely sit down with a pro and have him prepare the first year return and inform you of things an S-Corp must do.     for example the corp can have investors that perform no services. on the other hand there is usually at least one who does.   every shareholder who performs services  must take a salary.    sometimes that is not done for the first year or two but sooner or later the IRS will catch this and then the consequences can be horrendous.    it will impute salaries to those that are active.  then they will hit a least one shareholder with penalties for failure to withhold and pay payroll taxes.  these penalties are substantial.       most states require that employees be cover by workmen's comp insurance.  shareholders who perform services are employees and the failure to cover them can result in  penalties.   sales tax? - the corp will have to register with the state.   there are the record keeping requirements.    certain irrevocable  elections like for start up costs must be made in the initial return. if the corp incurs losses there are basis, at risk and passive loss issues that determine how much of the loss each shareholder may deduct.

 

 

the pro can also discuss whether a LLC would have been better than an S-Corp  

 

it will be far cheaper to pay a pro for the first year than having to pay the pro to clean up any mess that's created.  

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