My husband and I started a new small business in May 2011 with a business structure of sole proprietorship. In Dec 2011 we incorporated business as an S corporation. I know that even though we incorporated late (December 28) 2011 we still have to file a 1120S by March 15th or file an extension. My question is for the business activity that took place from the time we opened the company in May 2011 thru Dec 27th 2011, is this activity reported under our personal individual tax return since we were a sole proprietorship for those 7 months?

“My question is for the business activity that took place from the time we opened the company in May 2011 thru Dec 27th 2011, is this activity reported under our personal individual tax return since we were a sole proprietorship for those 7 months?”---> You need to file your return as a SP;an election to become as S corp always becomes effective at the beginning of the Corp’s tax year. So, to have the election apply to the corp’s current tax year, 2011 in your case, the corp must file Form 2553 during the prior tax year, I mean 2010, or within 2.5 months of the current year, 2011(I mean by Mar 15 2011).For example, on March 1, 2011, you file form 2553 with the IRS to elect S corp status. Because the election is filed before Mar 15 , 2011, it’d be effective retroactive to Jan 1 2012. An election files after Mar 15, 2011 wouldn’t be effective until Jan1 2012.Your election to be taxed as an S-Corp might not be effective until the following tax year, 2012,so the rest of your tax return should reflect this fact if it applies. Also, filing with the IRS for treatment as an S-Corp does not change the fact that your business remains an SP for all other purposes. You usually file Form 2553 by December 31st 2011 if the company wishes to convert to an S-corporation for the following year, 2012.