The S-corp is an attractive business structure for several reasons. That's why so many start-up enterprises adopt it. But it carries risks and obligations that many people don't fully understand.
The IRS knows this, and that's why they're scrutinizing S-corps for possible violations. It's a rich source for potential revenue, and as you might have noticed, the federal government needs money!
The same goes for the California Franchise Tax Board and State Board of Equalization. They're all increasing their auditing and enforcement efforts with a special focus on S–corps. And they anticipate a significant increase in revenue.
Ignorance is no excuse
As the owner of a corporation it is your duty to comply with ALL relevant regulations. The various agencies won't care that you didn't know the rules; you'll still have to pay, and that can include penalties and interest.
Worse, non–compliance can also get your S status revoked. And yes, they can "pierce the veil", destroying the barrier between your business and personal assets.
It's up to you to make sure your company meets all the requirements. But, a brief consultation with us can set you on the right path. As they say, an ounce of prevention ...
Meanwhile, here are some articles that will help (In PDF format, so you can download and print them!):
- Record keeping and compliance Do’s and Don’ts for good accounting hygiene
- Corporate meetings, resolutions and minutes You MUST have corporate meetings even if you are the only one there!
- Shareholder Compensation How do I pay myself (and other shareholders who work for the corporation), and how much? What about medical insurance?
- Mileage and travel expenses How do I keep records and receive reimbursement?
- Stock basis? Debt basis? What are they and why do they matter?