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Setting up an S Corporation involves several steps and considerations. Here's an overview of the process to help you establish your S Corporation:

  • Establish Eligibility:

    • Ensure that your business meets the eligibility requirements to elect S Corporation status.
    • For example, your business must be a domestic corporation, have only allowable shareholders (such as individuals, certain trusts, and estates), and not have more than 100 shareholders.
  • Form a Corporation:

    • Incorporate your business by filing the necessary documents with the state where you plan to form your S Corporation.
    • Prepare and file the Articles of Incorporation or Certificate of Incorporation with the Secretary of State or the appropriate state agency.
    • The incorporation process typically includes choosing a unique business name, identifying the purpose of the corporation, appointing directors, and establishing share structure.
  • Obtain an Employer Identification Number (EIN):

    • Apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS).
    • The EIN is a unique identifier for your S Corporation and is necessary for tax purposes, opening a business bank account, and hiring employees.
    • You can apply for an EIN online through the IRS website.
  • Hold an Organizational Meeting:

    • Conduct an organizational meeting of the corporation's shareholders and directors.
    • During this meeting, you will adopt bylaws, elect officers, and address any other initial administrative matters.
  • File Form 2553 with the IRS:

    • To elect S Corporation status for 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 appropriate timeframe (usually within 75 days of incorporation or the beginning of the tax year).
  • Register for State and Local Taxes:

    • Depending on your location and the nature of your business, you may need to register for state and local taxes, such as sales tax or business licenses.
    • Research the requirements specific to your state and industry to ensure compliance.
  • Business Permits and Licenses:

    • Identify any required business permits or licenses necessary for your industry or location.
    • Research federal, state, and local regulations to determine the specific permits or licenses applicable to your S Corporation's operations.
  • Separate Business Bank Account:

    • Open a separate bank account for your S Corporation to maintain clear separation between personal and business finances.
    • This helps establish the S Corporation as a separate legal entity and simplifies accounting and financial management.
  • Comply with Ongoing Obligations:

    • Maintain proper records and documentation of S Corporation activities, including financial transactions, contracts, and meeting minutes.
    • Fulfill any ongoing reporting and compliance obligations, such as annual reports, tax filings, and state-specific requirements.

It is important to consult with an attorney or a business professional who specializes in business formation and taxation to ensure compliance with all legal and regulatory requirements specific to your state and the S Corporation structure. They can provide personalized guidance based on your specific circumstances and help you complete the necessary steps accurately and on time.

Business Services: Entity - Set up S Corporation

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