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Contains verified entity-type comparison tables (C-corp/S-corp/LLC tax differentials, formation procedures, S-election deadlines), IRS officer compensation multi-factor analysis with Schedule E audit triggers, and IRC 267/482 related-party rules with Form 5472 foreign-ownership reporting. Covers EIN, ownership structure, constructive ownership (IRC 267(c)), controlled groups, fiscal year, accounting method, accumulated earnings tax (Bardahl formula), QSBS (IRC 1202), and state filing obligations. Consult when determining entity type, evaluating S-election timing or late relief (Rev. Proc. 2013-30), setting or defending officer compensation, identifying related parties, assessing Form 5472 requirements, analyzing AET exposure, onboarding a new entity, or answering "who owns this company / what entity type are we."
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Cross-cutting reference for corporate entity information that every service line
Cross-cutting reference for corporate entity information that every service line consumes. Covers the data elements that identify an entity, its legal structure, its ownership, and its compliance obligations that flow from those characteristics.
State-specific scope: Entity type classification, fiscal year/accounting method, ownership structure, foreign ownership, officers, related-party rules, and change events are nationally applicable. State filing obligations marked (Florida) contain Florida-specific formation procedures, fees, and corporate income tax rules. Practitioners in other states should substitute their state's requirements.
Every engagement begins with capturing the core identity fields. These fields drive downstream decisions across bookkeeping, tax, and financial planning.
Legal name — The exact name on file with the state Division of Corporations (not DBA/trade names). Use the legal name for all tax filings, bank accounts, and engagement letters. Verify against the state filing (sunbiz.org for Florida).
EIN (Employer Identification Number) — Obtained via Form SS-4, filed online at irs.gov (immediate issuance) or by fax/mail. Required before opening bank accounts or filing any returns. The EIN confirmation letter (IRS Letter 147C) should be in the permanent client file. For reconstructed/delinquent filings where the EIN is unknown, file Form 4506-T for IRS transcripts or call the IRS Business line.
DUNS number — Dun & Bradstreet identifier. Required for government contracting, some vendor applications, and credit reporting. Not all entities have one.
State of incorporation/organization — The state where articles of incorporation (corporation) or articles of organization (LLC) were filed. Determines governing corporate law, annual report obligations, and home-state tax nexus. Florida corporations file with the Division of Corporations at sunbiz.org.
Date of incorporation — Relevant for QSBS (IRC 1202) holding period computation, S-election timing, and delinquent filing lookback.
Entity type determines the tax return filed, the equity account structure, the ownership rules, and available tax elections. The classification flows from the check-the-box regulations (Treas. Reg. 301.7701-1 through -3).
Entity-level tax at flat 21% (post-TCJA). Distributions taxed again as qualified dividends (0/15/20% + 3.8% NIIT). Double taxation is the defining characteristic. Key attributes:
Pass-through via Schedule K-1. No entity-level federal tax (some states impose entity-level tax). Key constraints:
2% shareholder-employees cannot exclude employer-paid health, group-term life from income
S-Election (Form 2553): File within 75 days of formation, or by March 15 for calendar-year corps to be effective for current year. All shareholders must consent. Late election relief available under Rev. Proc. 2013-30 if filed within 3 years and 75 days of intended effective date with "FILED PURSUANT TO REV. PROC. 2013-30" at the top.
Pass-through via Schedule K-1. Maximum flexibility — unlimited members, any type, disproportionate allocations permitted if "substantial economic effect" (Treas. Reg. 1.704-1(b)). Active members' distributive share generally subject to self-employment tax (15.3% up to SS wage base, 2.9% above). Basis includes member's share of partnership liabilities (more generous than S-corp).
If owned by an individual: Schedule C. If owned by a corporation: reported on the corporation's return. State-law liability protection retained despite federal tax disregard. Since 2017, foreign-owned disregarded entities must file Form 5472 (treated as corporations for reporting purposes under Reg. 301.7701-2(c)(2)(vi)).
Fiscal year — Set during initial formation (board resolution adopting bylaws specifies fiscal year). Calendar year (December 31) is most common for C-corps. S-corps generally must use calendar year unless they establish a business purpose or make a Section 444 election. The fiscal year determines all filing deadlines.
Accounting method — Cash or accrual basis, elected on the first return filed. Must match between books and tax returns. Cash basis available for C-corps with average annual gross receipts of $29M or less (inflation-adjusted, 3-year average, IRC 448). Accrual basis required above that threshold. Changing methods requires Form 3115 (Application for Change in Accounting Method). The accounting method affects revenue recognition timing, expense deduction timing, and the Section 267(a)(2) accrual-to-cash matching rules for related-party transactions.
Maintain a shareholder register showing: name, SSN/EIN, number of shares (by class), percentage ownership (common and preferred separately), date acquired, acquisition method (original issue, purchase, gift, inheritance), cost basis, and any restrictions or vesting schedules.
C-corps may issue multiple classes: common stock (voting and/or non-voting), preferred stock (dividend preference, liquidation preference, convertible, etc.). Par value vs. no-par stock — par value is a nominal amount per share set in articles of incorporation. For no-par stock, entire issuance price posts to Common Stock or APIC per board resolution.
Equity accounts driven by entity type:
Closely-held corporation: Five or fewer individuals own >50% of stock (with attribution). Triggers heightened scrutiny for:
Controlled group: Parent-subsidiary (80%+ ownership chain), brother-sister (5 or fewer persons own 80%+ of each corp), or combined. Tax implications: shared Section 11 tax brackets (single bracket set), shared $250K AET credit, shared Section 179 limit, consolidated return eligibility.
Attribution rules expand "ownership" beyond direct holdings for determining related-party status: from family (spouse, siblings, ancestors, lineal descendants), from partnerships (proportionate share), from estates/trusts (beneficiary interest), from corporations (50%+ shareholder attributed proportionate share), and option attribution. No re-attribution from family to family. Always apply constructive ownership before concluding parties are unrelated.
A 25% foreign-owned U.S. corporation with reportable transactions with a foreign related party must file Form 5472. Since 2017, this also applies to foreign-owned U.S. disregarded entities.
Reportable transactions: sales/purchases of property, rents, royalties, services, commissions, interest, insurance premiums, loan balances, and changes in related-party debt. Must report even if transactions are at arm's length — reporting obligation is separate from pricing obligation.
Penalty: $25,000 per form for failure to file or substantially incomplete filing (post-2017; was $10,000 pre-TCJA). Additional $25,000 per 30-day period after IRS notification, with no cap. Penalty applies per form per year — multiple foreign related parties multiply the exposure. Reasonable cause defense is narrow.
A separate Form 5472 is filed for each foreign related party. Filed with Form 1120; due date follows the income tax return including extensions.
Determination checklist:
Form 1120 Schedule E requires disclosure for each officer: name, SSN, percent of time devoted to business, percent of stock owned (common and preferred separately), and amount of compensation. This data feeds IRS automated screening.
Common audit triggers on Schedule E:
For C-corps, officer compensation is a deductible expense (Line 12, Form 1120). IRS scrutinizes whether compensation is excessive — disguised dividends that let the corporation deduct more than arm's-length amounts.
IRS uses a multi-factor analysis: training/experience, duties/responsibilities, time/effort devoted, dividend history, comparable business compensation, compensation as percentage of gross/net income, company character/condition, documented compensation formula, and conflict of interest (officer who sets own pay as controlling shareholder).
The independent investor test: Would a hypothetical outside shareholder be satisfied with their return on investment after officer compensation is paid? If compensation consumes most profits leaving no reasonable shareholder return, it may be excessive.
Documentation requirements: Written employment agreement (signed before the tax year), board resolution referencing comparable data, compensation study or benchmarking, time records, and written job description.
Maintain: articles of incorporation, bylaws (or operating agreement for LLCs), board meeting minutes, organizational resolutions (adopting bylaws, appointing officers, authorizing bank accounts, setting fiscal year), stock certificates or membership certificates, shareholder agreements, and any amendments.
Corporation formation: Articles of Incorporation filed with FL Division of Corporations (sunbiz.org). Filing fee: $35 (online) + $35 registered agent designation. Annual report: $150, due May 1. Late annual report: $400 late fee. Failure to file results in administrative dissolution.
LLC formation: Articles of Organization. Filing fee: $100 (online) + $25 registered agent designation. Annual report: $138.75, due May 1.
Florida corporate income tax: 5.5% on C-corp taxable income (FL-apportioned federal taxable income with FL adjustments). $50,000 exemption. Florida uses single sales factor apportionment (post-2019). No personal income tax — pass-through income not taxed at state level in Florida.
S-corps in Florida: Pass through and avoid FL corporate income tax entirely. Florida does not impose an entity-level tax on S-corps.
Every entity must maintain a registered agent in its state of incorporation. The registered agent receives service of process, state correspondence, and compliance notices. Can be an individual with a physical FL address or a registered agent service company. Update the registered agent with the state if it changes — failure to maintain a registered agent can lead to administrative dissolution.
Related parties for loss disallowance and accrual-to-cash matching:
All intercompany transactions must be at arm's length (Section 482). Methods: comparable uncontrolled price (CUP), resale price, cost plus, comparable profits (CPM), profit split. Written intercompany agreements must be in place before transactions occur, covering nature/scope, pricing methodology, payment terms, and allocation methodology.
Intercompany loans must charge adequate stated interest at or above the applicable federal rate (AFR) per IRC 7872. Below-market loans trigger imputed interest. No $10,000 gift loan exception for corporation-shareholder loans.
For multi-entity structures, maintain a current ownership diagram showing: each entity (legal name, EIN, entity type, state, fiscal year), ownership percentages between entities, officer overlap, intercompany transaction types and directions, and controlled group or affiliated group status.
Track these events because each triggers compliance actions across service lines:
Entity type selection — Retained earnings favor C-corp at 21%. Distribution-heavy businesses favor pass-through (especially with QBI deduction through 2025). QSBS exclusion (IRC 1202, 100% gain exclusion for C-corp stock held 5+ years) favors C-corp for startups planning stock sales. VC/institutional investors typically require C-corp.
S-election timing — Within 75 days of formation or by March 15 for calendar-year corps. Missed deadline: Rev. Proc. 2013-30 relief within 3 years 75 days. Verify eligibility: 100 shareholders max, US individuals/trusts only, single class of stock, calendar or permitted fiscal year.
Is this a related party? — Apply constructive ownership rules (IRC 267(c)) before concluding unrelated. Attribution from family, partnerships, estates/trusts, corporations, and options. Affects loss disallowance, accrual-to-cash timing, and transfer pricing requirements.
Form 5472 required? — 25%+ foreign ownership (direct or constructive) plus any reportable transaction with a foreign related party. $25,000 penalty per form per year for non-filing.
AET exposure? — Accumulated E&P exceeding $250K ($150K for PSCs) without documented reasonable business needs. The TCJA 21% rate makes retention attractive, increasing IRS scrutiny. Prepare a Bardahl working capital computation and document specific, definite, feasible plans for retained earnings via board resolutions.
Reasonable compensation defensible? — Document before the tax year begins: written employment agreement, board resolution with comparable data, benchmarking study. The independent investor test: do shareholders receive a reasonable return after officer compensation?
Read these for deeper detail on specific entity profile topics:
references/client-onboarding.md — Entity information gathering checklist and accounting system company setup procedures. Read the "Information Gathering Checklist" section for the complete data collection list (legal name, EIN, entity type, state of formation, fiscal year-end, articles of incorporation) and the "Company Setup" section for how entity type drives software configuration. Essential when onboarding a new entity. For platform-specific setup steps, delegate to qbo-integration:qbo-coa.references/entity-selection.md — Comprehensive entity type comparison with tax rate differentials, formation procedures (Florida-specific filing fees and steps), S-election mechanics (Form 2553 timing, Rev. Proc. 2013-30 late relief), QSBS analysis, and decision factors. Read when advising on entity formation, conversion, or when the current entity type is questioned. The "Effective Date Log" tracks legislative changes affecting entity selection math.references/officer-compensation.md — IRS multi-factor reasonable compensation analysis, independent investor test, Schedule E reporting requirements and audit triggers, documentation best practices (employment agreements, board resolutions, benchmarking sources), and audit defense strategies. Read when setting or defending officer compensation levels or when zero-compensation years appear in delinquent filings.references/accumulated-earnings-tax.md — AET computation mechanics, year-by-year rate table, accumulated earnings credit ($250K/$150K), reasonable business needs test (recognized vs. unreasonable indicators), Bardahl working capital formula (operating cycle computation, peak vs. average method), and PHC tax interaction. Read when a C-corp's retained earnings approach or exceed $250K or when evaluating dividend policy.references/intercompany-transactions.md — IRC 267(b) related-party definitions with constructive ownership rules, Section 267(a)(2) accrual-to-cash timing mismatch, Section 482 transfer pricing methods, Form 5472 filing requirements and $25,000 penalty, and intercompany loan rules (AFR, IRC 7872). Read when identifying related parties, structuring intercompany transactions, or determining Form 5472 obligations.references/state-nexus.md — Physical presence and economic nexus standards, P.L. 86-272 protection (and its limitations for service companies), Florida corporate income tax rules (5.5% rate, $50K exemption, single sales factor apportionment, NOL rules, estimated tax, filing deadlines), and multistate filing considerations. Read when evaluating state filing obligations or FL-specific tax questions.For entity setup and onboarding workflow:
firm-operations:engagement-management for engagement letter requirements, client acceptance evaluation, pre-engagement screening, and the full onboarding lifecycleFor entity type tax advisory:
tax-prep:tax-planning for entity selection analysis, officer compensation optimization, accumulated earnings tax planning, and tax planning strategies that depend on entity typeFor entity-type-driven account structure:
accounting-foundation:chart-of-accounts for how entity type determines equity accounts, COA template selection, and Form 1120 tax-line mappingFor platform-specific entity configuration:
qbo-integration:qbo-coa for accounting system company setup (entity type selection, fiscal year, accounting method, feature configuration) and platform-specific account templates by entity typebookkeeping:transaction-processing — entity type determines posting rules and equity treatmentbookkeeping:compliance-reporting — ownership structure drives 1099 and worker classification decisionstax-prep:form-1120-prep — EIN, entity type, fiscal year, officers for return header and Schedule Etax-prep:tax-forms — foreign ownership status determines Form 5472 requirementtax-prep:tax-planning — entity type and ownership drive planning strategy selectiontax-prep:state-returns — state of incorporation and nexus determine filing obligationsfinancial-planning:strategic-advisory — ownership structure affects M&A, succession, and compensation planningfirm-operations:engagement-management — entity profile data populates engagement letters and onboarding checklistsnpx claudepluginhub aeyeops/aeo-basis-plugin-marketplace --plugin accounting-foundationGuides founders and freelancers through choosing the right legal entity (sole prop, LLC, S-corp, C-corp) based on liability, tax, and funding trajectory.
Tracks entity compliance deadlines (annual reports, franchise taxes, filings) by jurisdiction. Initializes a YAML tracker, reports upcoming/overdue items, updates status, runs health audits, and exports to CSV.
Guides tax preparation client communications with federal deadlines, entity-specific requirements (Sole Prop, S-Corp, Partnership, C-Corp), deduction guidance, and estimated payment rules.