Generally, the corporation must make estimated tax payments for the following taxes if the total of these taxes is $500 or more:

For more information regarding estimated tax, refer to Instructions for Form 1120S, U.S. Income Tax Return for an S Corporation, page 5 and Publication 542, Corporations, page 4.

References:

• Publication 542, Corporations
• Instructions for Form 1120S

Once you have established your corporation according to your state's requirements, you elect S corporation status for federal tax purposes by filing Form 2553 (PDF), Election by a Small Business Corporation. Several requirements must be met before you can elect S corporation status. Instructions for Form 2553, Election by a Small Business Corporation, provides the information on these requirements.

References:

• Form 2553 (PDF), Election by a Small Business Corporation
• Instructions for Form 2553, Election by a Small Business Corporation
• Form 1120S (PDF), U.S. Income Tax Return for an S Corporation
• Instructions for Form 1120S, U.S. Income Tax Return for an S Corporation

Once you have established your corporation according to your state's requirement, to convert from a C corporation to an S corporation, you must meet the same requirements as a newly formed corporation electing S corporation status. You must meet the requirements of a "small business corporation" which are, in general:

The S corporation can have no more than 75 shareholders and must make the election to be an S corporation on Form 2553 (PDF), Election by a Small Business Corporation, before the 16th day of the third month following the close of the C corporation's tax year if the election is to be effective for the current tax year. The C corporation must qualify as an eligible corporation during those 2 1/2 months and all shareholders during those 2 1/2 months must consent, even if they do not own stock at the time of the election. If the election is filed after the 15th day of the third month of the tax year, the election will be in effect for the next tax year and all shareholders at the time of the election must consent. For late elections that qualify for treatment as timely filed see Rev. Prov. 98-55. S-Corporation file Form 1120S for the tax year the election takes effect.

References:

• Form 2553 (PDF), Election by a Small Business Corporation
• Instructions for Form 2553, Election by a Small Business Corporation
• Form 1120S (PDF), U.S. Income Tax Return for an S Corporation
• Instructions for Form 1120S, U.S. Income Tax Return for an S Corporation

Voluntary termination of an S election is made by filing a statement with the Service Center where the original election was properly filed. A revocation may be made only with the consent of shareholders who, at the time the revocation is made, hold more than one-half of the number of issued and outstanding shares of stock (including nonvoting stock) of the corporation. There is specific information that must be included in the statement and this information is outlined in Regulations section 1.1362-6(a)(3) and in Instructions for Form 1120S, U.S. Income Tax Return for an S Corporation.

The revocation may state an effective date as long as it is on or after the date the revocation is filed. If no date is specified and the revocation is filed before the 15th day of the third month of the tax year, the revocation will be effective for the current tax year. If the revocation is filed after the 15th day of the third month of the tax year, the revocation will be effective for the next tax year.

You may want to consult the IRS Customer Service phone line at 1-800-829-4933 or you may wish to consult with a tax professional to be certain you have all the necessary information to file a proper revocation.

The S corporation election terminates automatically under certain conditions. Refer to Instructions for Form 1120S, U.S. Income Tax Return for an S Corporation.

References:

• Instructions for Form 1120S, U.S. Income Tax Return for an S Corporation
• Treas. Reg. section 1.1362-6(a)(3)
• Treas. Reg. section 1.1362-2(a)

In general, ordinary and necessary business expenses are deductible on business return. However, there are some items that partnership and S Corporation do not deduct at the business entity level but rather at the partner or shareholder level. These are referred to as separately stated items. For a more complete explanation of business in general, see Publication 535 , Business Expenses Publication 541, Partnerships, and Instructions for Form 1120S.

References:

• Publication 535, Business Expenses
• Publication 541, Partnership
• Instructions for Form 1120S
• Instructions for Form 1065

The process for closing a corporation consists of many steps that need to be followed in a specific order and within specified time frames. See Small Business/Self Employed - Closing a Business for information to properly terminate your business entity with the Internal Revenue Service.

References:

• Small Business/Self Employed - Closing a Business Instructions for Form 1120/1120A
• Instructions for Form 1120S
• Form 966 (PDF) , Corporate Dissolution or Liquidation

Subchapter C Corporation

This type of corporation can deduct capital losses only up to the amount of capital gains. If capital losses exceed capital gains, the excess is first carried back three years prior to the loss year and used to offset capital gains. Then, any unused loss is carried forward up to five years from the loss year to offset capital gains in those years. If the corporation is dissolved, the loss is not carried to any other year or return, it is simply lost.

A corporation may not carry a capital loss from or to a year in which it operates as a Subchapter S Corporation.

Rules for Carryback and Carryforward

When carrying a capital loss from one year to another, the following rules apply:

1. When figuring the current year capital loss, you cannot combine it with a capital loss carried another year. In other words, you can carry capital losses only to years that would otherwise have a net capital gain.

2. If you carry capital losses from 2 or more years to the same year, deduct the loss from the earliest year first.

3. You cannot use a capital loss carried from another year to produce or increase a net operating loss in the year to which you carry it back.

Corporation must include capital gain in full in gross but only to the extent they exceed capital losses. A corporation is taxed on net capital gain at the regular tax rate, including the additional phase-out rates for high-income corporations. See Instructions for Form 1120/1120A, U.S. Corporation Income Tax Return, and Publication 542, Corporations for additional information.

Subschapter S Corporations

An S Corporation generally passes gains and losses through to the shareholders based on their percentage of ownership (distributive share). For more information on how to calculate and report these losses, see Instructions for Form 1120S, Schedule K-1, Form 4797 (PDF), Sales of a Business, Form 1120S (PDF), U.S. Income Tax Return for an S Corporation, Entities: Sole Proprietorship, Limited Liability Company/Partnership (LLC/LLP, Corporation, Subchapter S Corporation.

References:

• Instructions for Form 1120/1120A, U.S. Corporation Income Tax Return
• Instructions for Form 1120S, Schedule K-1
• Form 4797 (PDF), Sale of a Business
• Instructions for Form 4797, Sales of Business Property
• Form 1120S (PDF), U.S. Income Tax Return for an S Corporation
• Entities: Sole Proprietor, Partnership, Limited Liability Company/Partnership (LLC/LLP), Corporation, Subchapter S Corporation

If you an unincorporated business by yourself, you are considered a sole proprietor. However, if you are the sole member of a domestic limited liability company (LLC), you are not a sole proprietor if you elect by filing Form 8832 (PDF) , Entity Classification Election, to treat the LLC as a corporation.

An husband or wife may be sole proprietor with the spouse an employee.

An unincorporated organization with two or more members is generally classified as a partnership for federal tax purposes if it members carry on a trade, business, financial operation or venture and divide its profits.

If a husband and wife jointly own and operate a business and share in the profits and losses, they are partners in a partnership.

The following businesses are taxed as corporations:

References:

• Publication 541, Partnerships
• Publication 542, Corporations
• Publication 3402 (PDF), Tax Issues For LLCs
• Publication 334, Tax Guide for Small Business
• Entities: Sole Proprietor, Partnership, Limited Liability Company/Partnership (LLC/LLP), Corporation, Subchapter S Corporation Form 8332 (PDF) , Release for Claimed to Exemption for Child or Divorced or Separated Parents

Some forms and entities have due dates other than the well-known April 15th due date. The instructions for the each type of form used will have the appropriate due date(s) noted. In general, sole proprietor's schedule of income and expenses is attached to the 1040. Therefore, the due date is the same as the 1040.

A Corporation must generally use the calendar year, unless the entity can establish a business purpose for having a different tax year. The due date is usually March 15th.

A partnership generally must conform its tax year of the partners unless the partnership can establish a business purpose for having a different tax year. The tax year is the same as one or more partners that own (in total) more than a 50-percent interest in partnership profits and capital. If there is no majority interest tax year, the partnership must adopt the same tax year as that of its principal capital holder. Where neither condition is met, a partnership must use the calendar year. A limited Liability Company reporting as a partnership has the same tax year as a majority of its partners.

References:

• Publication 541, Partnerships
• Publication 542, Corporation
• Publication 334, Tax Guide for Small Business
• Entities: Sole Proprietor, Partnership, Limited Liability Company/Partnership (LLC/LLP), Corporation, Subchapter S Corporation

Unfortunately, the answer to this question has many variables. Publication 541, Partnerships "Disposition of Partner's Interest" on Partnerships should provide the information needed.

References:

• Publication 541, Partnerships