Corporation S CorpTwo blanks that do not agree

The state office that takes the certificate of formation, if the filing is in order, is the office that makes the company exist. The fee written on that state's instructions buys the company. It does not buy a federal tax status, and it does not sign Form 2553 for you. People sometimes stack the fee and the election because both happen on paper. They are different offices and different years of the company's life.

People hold the stamped certificate and feel finished. The feeling is fair about the state. It is early about the IRS. An organizer in tax software then shows a field for how the company is taxed, and a click in that field feels like the second half of the same afternoon. The click is a note to the software. The IRS has not seen it.

We separate the afternoon into two jobs. First, what entity the state created. Second, whether a federal election was signed by every shareholder and accepted. Until the second job has a paper, the books and the return stay with the default. For a corporation that default is C. For an LLC the default depends on the number of owners and on any election that was actually filed.

Bankers, payroll menus, and lender worksheets all ask a short question. How is the company taxed. The honest answer is sometimes we are waiting on a paper. That answer is awkward in a dropdown, so people pick the nickname they hope is true. The nickname then spreads into the chart of accounts.

Picture a two owner LLC that files the certificate in June while someone selects S in the software in July. No 2553 is signed. In March the organizer still says S. The return wants a K-1. There is no acceptance to support it. The repair is to find the paper or to stop claiming the status.

Have that talk while the year is still young, well before the federal return week arrives. The company page is the place we send an owner who has the certificate in a drawer and a tax nickname in a menu.

We read the certificate for the name, the type, and the date. We ask for the acceptance if the owner believes an S year is underway. If the acceptance is missing, we say so in writing before payroll setup and before the return. We do not backfill a status to match a hope.

Books follow the status the papers support. If the papers support a partnership, the equity accounts look like partners. If they support an S year, wages and distributions get separate homes, and basis gets a schedule. If they support a C year, we stop forcing passthrough lines onto the trial balance.

Whichever status the papers support, the open months still have to be brought current before anyone builds a return on them. Reconciliations get finished. A short report says what changed. The return is prepared from that close, not from a fresh download the night before a deadline.

We will not tell you that every company must elect S by the middle of March. The Form 2553 instructions give a window of no more than 2 months and 15 days after the tax year begins, and they also allow the election during the prior year. Your year start decides the date. A calendar business year is not every company's year.

We will not promise late relief. Revenue Procedure 2013-30 is the text people mean when they ask if a late election can be fixed. It has conditions. Those conditions turn on the dates, the signatures, and what the company did that year. If the procedure does not fit, the status stays what the papers show.

A lawyer drafts the company agreement and answers the liability question. What we can pass along is the filing date, the owner count, and the IRS letter, if one exists. We do not stand in for that lawyer, and we do not run payday. Wage arithmetic stays with the payroll service the owner already picked.

The certificate can sit in a frame on the wall while the acceptance is still missing from the kitchen table. That split is ordinary, and it is a fair reason to ask. The frame holds one history and the federal letter holds another, and we will not mash them into a single nickname just because the menu already did.