You’ve got a brilliant business idea, a passion that ignites your entrepreneurial spirit, and the drive to turn your vision into reality. But before you dive headfirst into the world of business ownership, there’s a crucial decision to make: How do you structure your company?
Enter the S Corporation, a savvy choice for many small businesses looking to blend the benefits of a corporation with the flexibility of a partnership. And the best part? You can create your very own S Corp right from the comfort of your couch, thanks to the wonders of the digital age.
So, grab your favorite beverage, settle into your comfiest chair, and embark on a journey to discover how to bring your S Corp dreams to life, all with just a few clicks of your mouse and keyboard.
1. Choose a Business Name
2. Register Your Business
3. Create Corporate Bylaws
4. Obtain an EIN
5. File Form 2553 for S Corp Status
6. Register for State and Local Taxes
7. Comply with Ongoing Requirements
8. Online Services to Assist with S Corp Formation
Summary
1. Choose a Business Name
Selecting a business name is the foundational step in forming your S Corp. The name you choose will become a significant part of your brand identity and should reflect your business’s mission and values.
Research and Selection
- Brainstorm: Begin by brainstorming names that reflect your business’s purpose, values, and vision. Consider names that are memorable, easy to spell, and relevant to your industry.
- Uniqueness: Your chosen name must be unique and not easily confused with existing businesses. This is crucial to avoid legal issues and brand confusion.
Check Availability
- State Database: Most states have an online business name database where you can check the availability of your chosen name. This step ensures that no other business in your state is using the same name.
- Trademark Search: Conduct a trademark search through the United States Patent and Trademark Office (USPTO) to ensure your name isn’t trademarked at the federal level.
Domain Name
- Website Domain: Check if the domain name for your business is available. Having a matching domain name is crucial for your online presence.
>>>MORE: How To Create a Sole Proprietorship
2. Register Your Business
Registering your business involves filing legal documents with the state to formally establish your corporation.
Choose a State
Home State vs. Other States: Many businesses incorporate in their home state for simplicity. However, some choose states like Delaware or Nevada due to favorable corporate laws, lower taxes, or privacy benefits.
File Articles of Incorporation
This document, also known as a Certificate of Incorporation or Charter, is essential to officially register your corporation. It typically includes:
- Business Name and Address: Your corporation’s official name and primary business address.
- Purpose of the Corporation: A general statement of the business activities your corporation will undertake.
- Registered Agent: The individual or entity designated to receive legal documents on behalf of your corporation.
- Stock Information: Details about the stock your corporation is authorized to issue, including the number of shares and their par value.
- Incorporators: The names and addresses of the individuals who are forming the corporation.
Filing Fees: Each state charges a filing fee, which varies depending on the state. Filing can usually be done online through the Secretary of State’s website or a similar state agency.
3. Create Corporate Bylaws
Corporate bylaws are the rules that govern how your corporation operates. They are internal documents and are not filed with the state but are essential for the internal governance of the corporation.
Drafting Bylaws
Bylaws cover various aspects of your corporation’s operations, including:
- Meeting Procedures: How and when meetings of the board of directors and shareholders will be held.
- Voting Procedures: The process for voting on corporate matters, including who has voting rights and how votes are cast and counted.
- Officer Roles and Responsibilities: Descriptions of the duties and responsibilities of each corporate officer, such as the president, vice president, secretary, and treasurer.
- Record Keeping: Procedures for maintaining corporate records, including meeting minutes and financial records.
Adoption of Bylaws
The initial board of directors adopts the bylaws at the first organizational meeting. This meeting also typically includes:
- Appointing the initial directors
- Electing corporate officers
- Authorizing the issuance of stock
- Making other important initial decisions for the corporation
4. Obtain an EIN
Applying for an EIN
- IRS Application: Apply for an EIN through the IRS website. The application process is straightforward and free.
- Uses of EIN: The EIN is necessary for opening a business bank account, hiring employees, and filing federal and state tax returns.
>>>PRO TIPS: How to Create an LLC
5. File Form 2553 for S Corp Status
To elect S Corporation status, you need to file IRS Form 2553. This form allows your corporation to pass corporate income, losses, deductions, and credits through to shareholders for federal tax purposes.
- Completing Form 2553:
- Information Required:
The form requires detailed information about your corporation, including its name, address, EIN, and the signatures of all shareholders.
- Filing Deadline:
To be effective for the current tax year, Form 2553 must be filed no more than 2 months and 15 days after the beginning of the tax year in which the election is to take effect.
- Eligibility Requirements:
Ensure your corporation meets the IRS requirements for S Corp status:
- It must be a domestic corporation
- It can have only allowable shareholders (individuals, certain trusts, and estates)
- It can have no more than 100 shareholders
- It must have only one class of stock
6. Register for State and Local Taxes
In addition to federal tax requirements, your corporation must comply with state and local tax regulations.
State Registration
- State Tax ID: Depending on your state, you may need to obtain a state tax ID number.
- Sales Tax Permit: If your business sells goods, you may need to register for a sales tax permit.
Local Registration
- Business Licenses and Permits: Depending on your business activities and location, you may need various local permits and licenses. Check with your city or county government to determine the specific requirements.
7. Comply with Ongoing Requirements
Maintaining compliance with state and federal regulations is crucial for the continued operation of your S Corporation.
Annual Reports
- State Requirements: Most states require corporations to file annual or biennial reports to keep their information current. These reports typically update the state on the corporation’s address, officers, and directors.
- Filing Fees: There are usually filing fees associated with these reports.
Regular Meetings and Record Keeping
- Board and Shareholder Meetings: Regular meetings of the board of directors and shareholders are required. The frequency and procedures for these meetings should be outlined in your bylaws.
- Minutes: Accurate minutes of these meetings must be recorded and maintained. These records are essential for legal compliance and protecting the corporate veil.
- Federal and State Taxes: Ensure you file the appropriate federal and state tax returns for your corporation and comply with any other tax requirements.
Renewals
Keep track of renewal dates for any business licenses and permits and ensure they are renewed on time.
>>>GET SMARTER: How to Start an S Corp in Nebraska
8. Online Services to Assist with S Corp Formation
LegalZoom
LegalZoom is a popular online legal service that provides comprehensive assistance with business formation, including S Corp formation. They offer a user-friendly platform where you can file Articles of Incorporation, obtain an Employer Identification Number (EIN), and elect S Corp status. LegalZoom also provides various packages with different levels of support to meet your specific needs.
Incfile
Incfile specializes in business incorporation services and offers a straightforward process for forming an S Corp. They provide assistance with filing Articles of Incorporation, obtaining an EIN, and electing S Corp status. Incfile often offers free incorporation services (excluding state fees) and additional support options to help streamline the process of forming your S Corp.
MyCorporation
MyCorporation offers a range of services to assist with business formation, including S Corp formation. They provide support with filing Articles of Incorporation, obtaining an EIN, and navigating the process of electing S Corp status. MyCorporation’s platform is user-friendly and provides step-by-step guidance to help entrepreneurs establish their S Corporations with ease.
Northwest Registered Agent
Northwest Registered Agent specializes in registered agent and business formation services, including assistance with S Corp formation. They offer support with filing Articles of Incorporation, obtaining an EIN, and completing the necessary paperwork for S Corp election. Northwest Registered Agent prioritizes privacy and compliance, ensuring that your S Corporation formation process is conducted securely and in accordance with state regulations.
Summary
Creating an S Corporation online involves several detailed steps, from choosing a unique business name and registering your corporation with the state to drafting corporate bylaws, obtaining an EIN, and filing Form 2553 to elect S Corp status. Additionally, you must comply with state and local tax regulations and maintain ongoing compliance with state and federal requirements.
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