Want to start an S corporation for liability protection and tax savings?

Eligibility

To qualify to form an S corporation (also known as a small business corporation), your corporation must have 100 or less owners (also known as shareholders). S corporations can only have one class of stock (unlike C corporations which can have more than one class of stock). Owners can only be individuals (who are U.S. citizens or permanent residents), certain trusts or estates. S corporations must also adopt a calendar tax year (unlike C corporations which can choose their own tax year). 

Formation

S corporations are formed by filing articles of incorporation with the state. Afterwards an EIN (also known as an Employer Identification Number or Tax ID Number) should be obtained. Then, IRS Form 2553 should be filed with the IRS. Please note that the S corporation is done on the federal (IRS) level. Among other things, bylaws should prepared along with organizational corporate minutes. Stock should also be issued.

Ongoing Compliance

Don’t forget, in order to be afforded the protection and tax savings that S corporations provide, you also need to properly maintain the corporation and comply with all ongoing requirements. This includes filing and paying taxes, filing annual reports, preparing annual corporate minutes and other tasks.

Need Help Forming a S Corporation or Other Entity?

If you are a freelancer that needs help starting an S corporation or other entity type, LawInc is here to help.

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