Electing S

The mechanics of electing S status seem simple.   However, depending on your business and your shareholders, you may need to take some extra steps to make sure things go smoothly.  A shareholder agreement is quite helpful to head off problems that could derail your S election later without your knowledge.  Reviewing all trusts to make sure they qualify as shareholders is absolutely necessary.  Calculating the amount of earnings & profits from your C corporation years is the first step toward strategizing how to avoid unwanted surprises on distributions.  Projecting the built-in gain tax on the appreciation in your assets on the S election date (and getting any needed appraisals) is better done now than years later.  Finally, if you would like your K-1s before December 31 so your shareholders can plan better, your opportunity to elect a fiscal year as an S corporation is, in almost all cases, only possible on the first year’s return.