Does my S Corp need to file taxes?

[wintersbaw]

Hello,


I am looking for some advice on something that I hope will be glaringly obvious. I formed an S Corp several months ago as it was my intention to start a business as a Merchant Account Provider. I have since done nothing with the business due to lack of time....I currently have a full time job and was hoping to do this on the side. I have spent several hundred dollars on various equipment and setup costs, but haven't had any luck with bringing in new contracts. As a result, I have had no earnings what so ever. In trying to find the answer to this myself, I have unearthed the unsettling fact that I should have been paying myself a salary? My business has no assets, no bank account and no source of income yet. I have read that some folks prop their S corps up with personal savings until they can float on their own, for me this isn't an option. My understanding was that the S corp would pass its earning/losses onto me and that I would factor it into my annual taxes. In the past, I have used simple software solutions for my personal filings. Can anyone offer any advise that speaks to these points?

Thank you,
Brian

[Business Attorney]

A corporation must file a tax return, and the penalties for not filing can be substantial even if there is no income to report. There is some opinion that for a corporation created late in the year in preparation of starting business the following year, but with no activity, that it has not commenced business and that no return is required. However, you say "I have spent several hundred dollars on various equipment and setup costs, but haven't had any luck with bringing in new contracts. " That sounds like business activity to me.

Personally, I would suggest that you file a return for the S corporation.

[jamesray50]

You don't need to pay yourself a salary since you didn't have any income. You do need to file a Form 1120S due by March 15th. You will file a Schedule K-1 with your personal tax return.

[wintersbaw]

Thank you both for your advice and input!

Brian

[Evan]

I agree with the two posters above, an S-Corp return should be filed and no payroll was necessary this year. It's better to file, especially as an S-Corp, as you don't want to potentially lose that "S" status.