Maintaining S Corp Status
To confirm S corp status, call the IRS at (800) 829-4933. The election stays valid even if new shareholders do not consent.
If your business missed the S corp election deadline, include a reasonable cause. For example, your accountant or tax professional neglected to file on time.
S corps have no special ownership requirements. One person can form an S corp, while some states require at least two people to form an LLC.
Dissolution of S Corporation
Getting Approval to Dissolve an S Corporation: In general, you cannot dissolve a business with S Corp status without the approval of shareholders or the board of directors.
You can submit the Certificate of Dissolution by mail or in person. As with the Certificate of Election to Wind Up and Dissolve, there is no fee for a Certificate of Dissolution that is mailed in, but there is a $15 special handling fee for documents hand-delivered to the SOS office in Sacramento.
IRS Guidelines and Requirements
The IRS will only allow you to claim losses on your business for three out of five tax years. If you don’t show that your business is starting to make a profit, then the IRS can prohibit you from claiming your business losses on your taxes.
The IRS definition of reasonable compensation is “the value that would ordinarily be paid for like services by like enterprises under like circumstances.” Shareholders/owners doing anything more than only investing money in the company must be considered employees and paid salaries equal to those paid for services in comparable industries.