1. Find out if You Qualify to Be an S Corporation.
Your first step when trying to form an S Corporation is to look up your state's requirements. Most of the time, this involves a limitation on the number of shareholders, and only one class of stock. However, you must also apply at the federal level, since one of the primary benefits of having an S Corporation is pass-through taxation and the elimination of double taxation. No matter the state, you'll need to file Form 2553 Election by a Small Business Corporation with the IRS. The IRS sets forth particular requirements that you must meet, including:
- Status as a domestic corporation, meaning that the corporation is incorporated in the United States
- One class of stock
- 100 or fewer shareholders
- Not be an insurance company, qualifying financial institution, or domestic international sales corporation
2. Set up Your Corporation.
If your business qualifies, then you can go about establishing your corporation. You have to research your business name just as you would for a C Corporation. Once you choose the name, you must then prepare the articles of incorporation. The requirements can vary from state to state, but make sure that you include the following information at a minimum:
- Business owners or founders' names
- Business name
- Business address
- Desire to be an S Corporation (in some cases, you may have to submit a copy of Form 2553)
Once you finish the articles of incorporation, you mail the paperwork in to the Secretary of State or the Small Business Administration Department. The registration fee should be included in this mailing. Before you send it off, double check the paperwork for any possible errors, since the government might not return your money if your S Corporation is not approved. Once you've mailed in all of the paperwork and paid the filing fees, you should receive the equivalent of a Certificate of Incorporation for your new S Corporation.
If you're ready to start an S Corporation, we can take care of the paperwork for you. File your S Corporation today.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.