Questions founders ask us

Yes, in almost every case. Four years with a one-year cliff is the convention, and it protects the remaining team if someone leaves early.

Investors usually require it anyway, and imposing vesting later is a negotiation you would rather not have. It also makes the 83(b) election relevant from day one.

Apply directly with the IRS using Form SS-4. If you have an SSN or ITIN, the online application issues the number immediately. Without one, you file by fax or mail and wait.

You need the legal entity name, the formation state, and a responsible party before you start. Our step-by-step guide to getting an EIN covers each field on the SS-4 and the mistakes that cause the IRS to reject an application.

Yes, by filing a revocation statement with the IRS, with consent from shareholders holding more than half the shares.

Once revoked, the company generally cannot re-elect S status for five years without IRS consent, so it is not a decision to reverse casually. More on the election.

Profits pass through to shareholders rather than being taxed at the corporate level, which removes the second layer of tax on distributions.

For an owner-operated profitable business that is a real saving. For a company planning to raise venture capital it is usually the wrong move. Our Form 2553 guide covers the trade-offs.

A return filed for a tax year in which your US corporation had no transactions. The obligation to file does not depend on having activity.

Dormant companies still file, still owe franchise tax where applicable, and still accrue penalties for a missed return. Our Form 1120 page covers what is needed.

15 March for calendar-year partnerships, the same date as the S-Corp return and a month before the C-Corp deadline.

The early date gives partners time to use their K-1s on personal returns due in April. An extension moves it six months. More on partnership returns.

Yes. Correcting depreciation that was understated or overstated in prior years is one of the most common uses of Form 3115, and it usually qualifies as an automatic change.

The catch-up comes through as a section 481(a) adjustment rather than by amending old returns.

As soon as the year is closed, which for a calendar-year company means January or February rather than days before the deadline.

Preparers queue work. Arriving late means an extension, which is fine, but it also means less time to fix anything the review turns up.

Form 1040 is your personal return. Form 1120 is your company's corporate return, filed by the C-Corp as a separate taxpayer.

Owning a C-Corp does not merge the two. The company files its own return and pays its own tax, and you file personally on salary or dividends you receive.

15 April for the prior calendar year, with an automatic extension available to October on request.

US persons living abroad get an automatic two-month extension to June without filing anything. The extension moves the filing date, not the payment date. Our Form 1040 guide covers the dates.

Because the state's notice uses the authorized shares method by default, which assumes your 10,000,000 authorized shares are worth taxing at face.

Switching to the assumed par value capital method, using issued shares and gross assets, usually brings it down sharply.

Yes, ours is free and requires no account. It exists because the state's default calculation method produces an alarming figure for a startup with 10,000,000 authorised shares.

Try the calculator with your share count and gross assets to see both methods side by side.

For a small number of transactions on cash basis, yes. It gets harder with payroll, multiple currencies, deferred revenue, or equity to account for.

The usual failure is not capability but time: the books slip for months and the cleanup costs more than the service would have. Our bookkeeping guide covers the line.

An LUT lets an Indian exporter supply services without paying IGST upfront, instead of paying and claiming a refund later. It is filed annually with the GST authorities.

For an Indian subsidiary invoicing a US parent, it is the difference between cash tied up in refunds and not. More on cross-border compliance.

Each transaction is recorded in the currency it occurred in and translated for reporting, so exchange gains and losses stay visible rather than buried.

Money moving between your US and Indian entities also carries transfer pricing implications. Our cross-border bookkeeping guide covers the treatment.

Yes. The obligation follows the election, not the activity. A dormant S corporation still files and still issues K-1s showing zero.

Penalties for a late 1120-S are charged per shareholder per month, so a quiet year can produce a real bill. More on corporate returns.

Within roughly two and a half months of the start of the tax year you want the election to apply to, or at any point in the preceding year.

Form 2553 filed later generally applies from the following year, though late election relief exists if you can show reasonable cause.

Without documentation you are expected to presume the payee is US or foreign under the presumption rules, which generally leads to withholding at the statutory rate.

The liability for tax you should have withheld falls on your company. Collect the forms retrospectively and fix the position going forward.

Form 8995 is used to calculate and claim the Qualified Business Income Deduction (QBID) for individuals, estates, and trusts.

Bookkeeping fees are usually monthly, based on transaction volume, number of accounts, and complexity.

The payroll provider debits one amount covering net pay plus taxes, while your books split that into several accounts. Reconciliation matches the single bank line against the components.

Differences usually come from timing: taxes remitted on a different date to net pay. Our reconciliation guide covers the process.

Estimate your income, deductions, and credits for the year, work out the tax, and divide across the four payment periods. The worksheet in the form instructions walks through it.

Safe harbour rules let you base payments on last year's tax instead, which avoids penalties when this year's income is hard to predict. More on Form 1040.

Several states align with the federal quarters, and others do not. Thresholds for who must pay also differ.

Check each state separately. Companies routinely stay current federally while missing a state schedule nobody looked up.

Rarely on its own. US anti-deferral rules, including GILTI, tax US shareholders on much of a controlled foreign corporation's income whether or not it is distributed.

Subsidiaries are formed for operational and legal reasons, hiring locally, signing local contracts, not as a tax strategy. Expect more filings, not fewer.