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I heard from someone that if you have a S Corp and you don't make any profit for two years, then you can get penalized for it. Is this true?

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Have you asked your accountant instead of a random group of people? – Gary E♦ Apr 30 '12 at 17:16
In what jurisdiction? – dnbrv Apr 30 '12 at 17:46
This is in Florida. – Vakey Apr 30 '12 at 18:30
This is likely a confusion of business vs hobby treatment for federal taxes - but if you have a formal entity you are not in this category. – TimJ♦ Apr 30 '12 at 19:43

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That is simply not true.

You may have heard part of something else, however: You can get penalized for not filing your 1120S income tax statements (including the very first year of incorporation) even if your profit is 0. http://www.irs.gov/instructions/i1120s/ch01.html (see "late filing of return")

The state of the corporation shouldn't matter for federal income tax, because S-Election is purely a federal tax matter handled by the IRS. (That said, some states do treat S-Corps differently from C-corps in state taxes). In Florida, for the first year in which an entity qualifies as an S Corporation, the company must file the informational portion of Form F-1120 the Florida Corporate Income/Franchise tax return. In subsequent years, S corporations are only required to file Florida Form F-1120 if the S Corporation has federal taxable income. Penalties may be involved if you fail to file these forms.

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Thanks for the answer! The additional information about filling out you income tax statements helps too. – Vakey Apr 30 '12 at 19:56

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