To start an S Corporation (S Corp), you need to follow several steps. Here's a general overview of the process:
1. Determine eligibility: Not all businesses are eligible for S Corp status. Ensure your business meets the requirements, such as being a domestic corporation, having only allowable shareholders (such as individuals, certain trusts, and estates), and having no more than 100 shareholders.
2. Choose a business name: Select a unique name for your S Corp that complies with the rules and regulations of your state's corporate division. Ensure the name is not already in use and includes the required corporate designator like "Corporation," "Incorporated," "Company," or an abbreviation thereof.
3. File articles of incorporation: Prepare and file the articles of incorporation with the appropriate state agency. This document typically includes details about your corporation, such as its name, purpose, location, shareholders, and the number of authorized shares.
4. Appoint directors and officers: Select individuals to serve as directors and officers of your S Corp. Directors are responsible for overseeing the corporation's affairs, while officers handle day-to-day operations. Ensure compliance with any state-specific requirements regarding the number of directors and their qualifications.
5. Obtain necessary licenses and permits: Determine the licenses and permits required to operate your S Corp legally. The requirements vary depending on your industry, location, and the nature of your business. Contact the relevant local, state, and federal agencies to identify and obtain the necessary licenses and permits.
6. Apply for an Employer Identification Number (EIN): Obtain an EIN from the Internal Revenue Service (IRS). This unique nine-digit number is used to identify your corporation for tax purposes. You can apply for an EIN online through the IRS website.
7. File Form 2553: To obtain S Corp status for federal 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 specified timeframe.
8. Develop corporate bylaws: Create bylaws that outline the internal operating procedures and governance of your S Corp. These bylaws typically cover topics such as shareholder meetings, voting procedures, officer roles and responsibilities, and the issuance and transfer of shares.
9. Open a business bank account: Separate your personal and business finances by opening a dedicated business bank account. This account will be used to handle corporate transactions and manage finances.
10. Maintain compliance: Fulfill ongoing compliance requirements, such as filing annual reports, conducting regular shareholder meetings, and adhering to state and federal tax obligations. It's essential to stay updated on any regulatory changes that may impact your S Corp.
Remember, the process and requirements for starting an S Corp can vary depending on your jurisdiction. It's recommended to consult with a qualified attorney or tax professional to ensure you comply with all legal and tax obligations specific to your situation.
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