If you are small business operator, you may be wondering how to form an S Corp. This type of business entity may, at first, sound a bit intimidating, as it involves incorporation.
However, you just need to go over the requirements with me and my staff to set up the business. Book a call to speak to us here: https://mollaeilaw.com/.
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How to Form an S Corp – Learn, First, What You Will Gain Legally and Financially
If you want to know how to form an S Corp and how you will gain tax-wise, you should go over the details with a lawyer and an accountant. To speak to me, email firstname.lastname@example.org today.
I can explain the benefits to you so you can see how this type of corporation can help your business. Once you know about the advantages and drawbacks, you can decide on what will be best for your company.
Learn How to Form an S Corp – Major Benefits
Let’s explore the advantages of learning how to form an S Corp.
Protection from Liability
By forming an S Corp, you separate your personal assets from your business assets, thereby protecting yourself from business lawsuits and similar actions. If you currently operate as a sole proprietor, you may run the risk of having your car or home claimed for business debts or lawsuits.
Forming an S Corporation will separate your personal and business property and obligations. If you already operate as a Limited Liability Company, you already have this advantage.
You will just not attract the capital funding you do as a corporation.
Avoid Double Taxation
If you form an S Corporation instead of a C Corporation, you will not have to pay taxes, first, on your revenue, then on the dividends of your shares. When an S Corporation is formed, the revenue passes through the entity and is only taxed when the employees and owners receive their money.
Invest from the Outside
Forming an S Corporation will also allow you to add up to 100 investors or shareholders or public trading. In turn, you can trade the equity in your company to further invest in your business. This gives you investment opportunities that you may not otherwise have on your own.
Stick with the Cash-based Method of Accounting
If your business is service-oriented and you do not inventory products for resale, you can also elect to use a cash-based accounting method versus the accrual method. A cash-based system makes it easier to keep the books.
Enjoy Tax Savings
The best reason for electing an S Corporation status is what you will save in taxes. Naturally, you will need to speak to your accountant to see how much you save in this respect. However, to give you a hint – you can save over what you pay in self-employment taxes if you have a business that operates as an LLC.
Find Out How to Form an S Corp or Elect S Corporation Tax Status
Now that you see what you can gain by knowing how to form an S Corp, let’s review the 5 steps you need to take to make it happen. Before you go over the steps, however, remember this:
If you are not concerned about buying and selling stock, you can still elect to have an LLC treated as an S Corporation for tax purposes.
The 5 Steps You Need to Know when You Learn How to Form an S Corp Legally
I can assist you with this type of election. Contact me anytime. Email email@example.com for all the details. However, if you wish to invest in stock shares and attract investors, it is best to follow the 5 steps below and learn how to form an S Corp.
1. Find and Choose a Unique Name for Your Business
Before you do anything, you need to choose a unique business name. Check out business names on the Secretary of State’s website where your business is based. If you don’t plan to set up your S Corp right away, you can reserve the name.
Also, you will need to provide a physical address for your company. You cannot use a P.O. Box
2. Assign a Registered Agent for Service of Process for Your Company
You cannot set up an S Corp without assigning a registered agent to receive your company’s legal and tax correspondence. The registered agent must be based in the state where you operate your business and should be available during regular business hours.
In many cases, it is better to use a registered agent service instead of an individual for the following reasons:
- If you do not wish to have your name and business address registered in the public records, you should opt for a registered agent service.
- A service can guarantee that any needed paperwork will be signed.
- If you establish a company outside your state, you can use the service for the out-of-state address for obtaining documentation.
3. Draft and Submit Articles of Incorporation
You will also need to file Articles of Incorporation with the Secretary of State’s Office. I can help you with this part of the process. Email firstname.lastname@example.org to schedule an appointment.
Make sure you include the following information on the Articles:
- The name of the corporation
- Your company’s street address and mailing address
- The company’s Registered Agent and agent’s address
- The corporation’s capital set-up: issued shares, owner, and number of shares
- The incorporator’s name and address
4. Submit the Articles of Incorporation to the Secretary of State
Once the Articles of Incorporation are drafted, you can submit them online or through the mail to the Secretary of State’s office.
5. Meet the State’s Compliance Mandates for Your S Corporation
After you file the Articles of Incorporation, you need to meet certain compliance requirements legally. I can assist you with this process.
Set up an appointment with me to discuss this step in further detail. Email email@example.com. Below are the basic compliance steps you will need to follow:
- File a Small Business Tax Election with the IRS – Form 2553. Doing so will allow your corporation to be treated as an S Corporation for tax purposes.
- Create and issue stock certificates to shareholders.
- Apply for the proper business permits and licenses.
- Obtain an Employer Identification Number (EIN) so you can pay employees and open up a business bank account.
- File taxes with your state’s Department of Revenue.
- Set up unemployment, payroll, disability, tax, and insurance systems for employees.
- Appoint corporate officers.
- Record important corporate information in a corporate records book.
One you get through the 5 above steps, you still have to have annual meetings and make sure you remain compliant. That is where I can support you. Contact me if you want to set up an S Corporation. Email firstname.lastname@example.org today.
What Happens Next?
Even if you know how to form an S Corp, you will need legal and accounting assistance to fully understand the process. You need to stay compliant and follow specific legal and financial practices.
While you can save on taxes, filing returns can also become complicated, if not confusing. That is why you need the proper professional support. Begin by contacting me today. Email email@example.com.
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