Does retained earnings go to zero for 2018 beginning balance on my S Corp 2018 balance sheet? A constructive dividend arises when a corporation distributes earnings and profits to shareholders without formally declaring a dividend but without the expectation of repayment. It would be messy to start over. Hmmm. Section 7701(a)(3) provides that the term corporation includes associations, joint-stock companies, and insurance companies. Your specific circumstances will determine whether you should form an LLC or an S Corp. First, determine if your business is financially viable enough to be eligible for S corporation tax treatment. 362; the transferor partnership takes a basis in the transferee stock received equal to the basis in the assets transferred, reduced by liabilities, under Sec. Anything that occurred before the S election, will have no impact on your basis. What is an S Corp? (using round numbers for simplification)My first year in business my retained earnings amounted to 30,000 while an LLC. Pasted as rich text. S Corporations can only have US residents as shareholders. Assets over: The specific tax treatment of each transfer differs. Although WCG Inc. has made every reasonable effort to ensure that the information provided is accurate, WCG Inc., and its partners, managers and staff, make no warranties, expressed or implied, on the information provided on this Site, or about any other website which you may access through this Site. You really dont care about this, do you? Because it paid $35,000. 357(c)(1) and therefore cannot give rise to income on incorporation. https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-stock-and-debt-basis, https://www.law.cornell.edu/cfr/text/26/1.357-2">https://www.law.cornell.edu/cfr/text/26/1.357-2

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