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S corp election not filed

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    S corp election not filed

    Client A and Client B have a jewelry making business in their home. In 2003 I filed Sch. C's for each of them. Filed an extension for 2004 and am working on returns now. I planned to do same for 2004. Technically, they have a partnership (oral agreement), but bottom line ends the same, with income being subject to SE tax.

    Here's the monkey wrench. Client A went online in Feb 2004 and formed a corporation with herself as only shareholder. Never told me she did this. Yesterday she calls to say she is going to dissolve corporation since she never used it. BUT she did business all year in the company's name so she really did use it.

    Here are my questions. (1) Am I correct in understanding that under Regs Section 301.9100-2(a) she would be allowed an automatic 12 month extension from the returns due date to make election if it is filed with the original return even if it is filed late? I got this information from NCPE workshop manual 2003 page 4-24.
    (2) Sine she only put herself in corporation, is there any way to split income/expenses with Client B?
    (3) Probably missing something else - what?

    Thanks for your help.

    S Corp.? Ptrship? Sched C?

    When client formed the corporation was stock issued? Has she been functioning as a corp.? Open a Corp. bank account? Any minutes of any meetings? Any inventory or assets transferred in to corp.?
    If not, then this would be a Sched. C.
    Was there a partnership agreement between the 2 persons? Did each client sell their own product? Maintain their own separate bank accounts? If this occurred then maybe this is an association, Joint Venture, and each reports their own separate activity.
    Just theorizing.
    If not, then the question is is it really a corp.?


      Answers to ???

      There is a bank account for the business. I think she operated the business as she had been doing previously. We had talked some about what would be the best entity for them to pursue but I had not make specific recommendations.

      She went online, filed for the corporation papers and then did nothing else along those lines. She doesn't even have an EIN yet.

      If I just filed a schedule c for 2004, what do I do about the corporation status. If it was formed in 2004 doesn't a return have to be filed for that year?

      It is a partnership in reality. Not joint venture. Client B has day job. He works with her on promotions and shows and other things. She designs and makes the jewelry.


        Corp. status

        Filing requirements for C Corp. If there has been no EIN applied for or issued, then the IRS filing would be none. The problem would be with the state. You could dissolve the corp. through the state office. If a form 1120 did have to be filed then just report no activity.
        All zeros.


          Secretary of State

          I haven't filed ALL states, but I have filed corporation returns in 6 of them.

          There is a database sharing in all of these states between the Secretary of State and the respective State Dept of Revenue. This prompts the Dept of Revenue to expect a return.

          One of my clients had a corporation formed on December 29th of the year in question, and elected a calendar year return. He failed to file for the year ended and the state started jumping up and down after a couple years insisting on a return for just 3 days!!