Setting up an S Corporation involves several steps and considerations. Here's an overview of the process to help you establish your S Corporation:
- Ensure that your business meets the eligibility requirements to elect S Corporation status.
- For example, your business must be a domestic corporation, have only allowable shareholders (such as individuals, certain trusts, and estates), and not have more than 100 shareholders.
Form a Corporation:
- Incorporate your business by filing the necessary documents with the state where you plan to form your S Corporation.
- Prepare and file the Articles of Incorporation or Certificate of Incorporation with the Secretary of State or the appropriate state agency.
- The incorporation process typically includes choosing a unique business name, identifying the purpose of the corporation, appointing directors, and establishing share structure.
Obtain an Employer Identification Number (EIN):
- Apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS).
- The EIN is a unique identifier for your S Corporation and is necessary for tax purposes, opening a business bank account, and hiring employees.
- You can apply for an EIN online through the IRS website.
Hold an Organizational Meeting:
- Conduct an organizational meeting of the corporation's shareholders and directors.
- During this meeting, you will adopt bylaws, elect officers, and address any other initial administrative matters.
File Form 2553 with the IRS:
- To elect S Corporation status for tax purposes, file Form 2553, Election by a Small Business Corporation, with the IRS.
- The form must be signed by all shareholders and filed within the appropriate timeframe (usually within 75 days of incorporation or the beginning of the tax year).
Register for State and Local Taxes:
- Depending on your location and the nature of your business, you may need to register for state and local taxes, such as sales tax or business licenses.
- Research the requirements specific to your state and industry to ensure compliance.
Business Permits and Licenses:
- Identify any required business permits or licenses necessary for your industry or location.
- Research federal, state, and local regulations to determine the specific permits or licenses applicable to your S Corporation's operations.
Separate Business Bank Account:
- Open a separate bank account for your S Corporation to maintain clear separation between personal and business finances.
- This helps establish the S Corporation as a separate legal entity and simplifies accounting and financial management.
Comply with Ongoing Obligations:
- Maintain proper records and documentation of S Corporation activities, including financial transactions, contracts, and meeting minutes.
- Fulfill any ongoing reporting and compliance obligations, such as annual reports, tax filings, and state-specific requirements.
It is important to consult with an attorney or a business professional who specializes in business formation and taxation to ensure compliance with all legal and regulatory requirements specific to your state and the S Corporation structure. They can provide personalized guidance based on your specific circumstances and help you complete the necessary steps accurately and on time.
Business Services: Entity - Set up S Corporation
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