How to Start an S Corporation
Starting a business can be an exciting and rewarding experience. However, choosing the right legal structure for your business is crucial to its success. One popular option for small businesses is the S corporation. In this article, we will discuss how to start an S corporation.
What is an S Corporation?
An S corporation is a type of corporation that offers the limited liability protection of a traditional corporation while also allowing the company's income to pass through to its shareholders' personal tax returns. This means that the company's profits are not taxed at the corporate level, but rather at the individual shareholder level.
Steps to Starting an S Corporation
- Choose a Name: The first step in starting an S corporation is to choose a name for your business. Make sure the name is unique and not already in use by another business.
- File Articles of Incorporation: Next, you will need to file articles of incorporation with your state's Secretary of State office. This document outlines the basic information about your business, such as its name, address, and purpose.
- Obtain an EIN: You will also need to obtain an Employer Identification Number (EIN) from the IRS. This number is used to identify your business for tax purposes.
- Draft Bylaws: Bylaws are the rules and regulations that govern your business. They outline how the company will operate, including how decisions will be made and how profits will be distributed.
- Hold an Organizational Meeting: Once your bylaws are in place, you will need to hold an organizational meeting with your shareholders. During this meeting, you will elect officers, adopt bylaws, and issue stock certificates.
- File Form 2553: To become an S corporation, you will need to file Form 2553 with the IRS. This form notifies the IRS that your corporation has elected to be taxed as an S corporation.
- Obtain Necessary Licenses and Permits: Depending on your industry and location, you may need to obtain certain licenses and permits to operate your business legally.
Starting an S corporation requires careful planning and attention to detail. By following these steps, you can ensure that your business is set up for success. Remember to consult with a legal or financial professional if you have any questions or concerns about the process. Good luck!