How to Start an S Corp: A Comprehensive Guide

Starting an S corporation can be a complex process, but with the right guidance, you can navigate the requirements and set up your business for success. In this article, we'll walk you through the steps to start an S corp, including the benefits, requirements, and necessary documents.

What is an S Corp?

An S corporation, also known as an S corp, is a type of business structure that provides tax benefits and liability protection for its shareholders. Unlike C corporations, S corps are pass-through entities, meaning that the corporation itself is not taxed on its profits. Instead, the shareholders report their share of the corporation's income on their personal tax returns.

Benefits of Starting an S Corp

There are several benefits to starting an S corp, including:

• Pass-through taxation: S corps avoid double taxation, which means that the corporation itself is not taxed on its profits.
• Liability protection: Shareholders' personal assets are protected in case the business is sued.
• Flexibility: S corps can have up to 100 shareholders, and there are no restrictions on the types of businesses that can be operated.
• Tax savings: S corps can save on self-employment taxes and reduce their tax liability.

Requirements for Starting an S Corp

To start an S corp, you'll need to meet the following requirements:

• File articles of incorporation: You'll need to file articles of incorporation with your state's business registration agency.
• Obtain an EIN: You'll need to obtain an Employer Identification Number (EIN) from the IRS.
• Create a shareholder agreement: You'll need to create a shareholder agreement that outlines the rights and responsibilities of the shareholders.
• File Form 2553: You'll need to file Form 2553 with the IRS to elect S corp status.

Necessary Documents for Starting an S Corp

You'll need the following documents to start an S corp:

• Articles of incorporation
• Shareholder agreement
• Form 2553
• EIN

Step-by-Step Guide to Starting an S Corp

Here's a step-by-step guide to starting an S corp:

1. File articles of incorporation: File articles of incorporation with your state's business registration agency.
2. Obtain an EIN: Obtain an EIN from the IRS.
3. Create a shareholder agreement: Create a shareholder agreement that outlines the rights and responsibilities of the shareholders.
4. File Form 2553: File Form 2553 with the IRS to elect S corp status.
5. Hold an organizational meeting: Hold an organizational meeting to elect the board of directors and officers.
6. Obtain any necessary licenses and permits: Obtain any necessary licenses and permits to operate your business.

Conclusion

Starting an S corp can be a complex process, but with the right guidance, you can navigate the requirements and set up your business for success. By following the steps outlined in this article, you can ensure that your S corp is properly formed and compliant with all applicable laws and regulations.