S-Corp Timing

2 replies [Last post]
Ready2Jump's picture
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Joined: 2006-05-30

Going Indy in a few months- how soon can I setup my S-Corp?  I
have expenses now that I would like to pay out of the corp chking
acct...

troll's picture
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Joined: 2004-11-29

Ready2Jump wrote:Going Indy in a few months- how soon can I setup my S-Corp?  I
have expenses now that I would like to pay out of the corp chking
acct...
I established mine immediately after going indy.  Call me paranoid, but setting up a corporation is a publicly disclosed filing, and technically you would be establishing and 'outside venture' without informing your firm.  If things ever got messy they would find out.  The paperwork to set it up is VERY simple and quick-your lawyer can do it in one day.  My suggestion-based only upon experience as I'm neither an accountant nor attorney-would be to make the expenditures from your personal 'bucket' and keep careful records, then set up the S-corp immediately upon going indy.

Indyone's picture
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Joined: 2005-05-30

I had the paperwork all prepared and filed about two weeks prior to my planned exit, and had the paperwork returned by the state a week before I left.  In light of Joe's commentary, that was probably another mistake I made, although, in hindsight, nothing ever came of it.  I was somewhat worried about another potential exposure, but judged the possibility to be minimal.  An associate's firm brought up a similar sin on his part at his TRO hearing, and the judge basically ingnored it, although no doubt, results can vary on that issue.
That being said, Joe's advice on the timing of filing is sound in my opinion.  You can always run pre-existing expenses through a schedule C sole proprietorship on your tax return, or more simply track them and reimburse yourself from your corporation once it is established and has sufficient cash.  Just hang on to all of your receipts and other evidence, such as mileage logs.
You need to be ramping up to your jump quickly...you don't want to make the jump in January, in my opinion.  The summer slow season is easier, although even that seemed hectic to me.

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