How to Start an S Corporation
If you decide to incorporate your business you will need to decide which type of corporation to select. Your Bryan business attorney can help you make this determination based on your corporate goals and needs.
What Is an S Corporation?
An S corporation is set up in accordance with Subchapter S of the Internal Revenue Code. This means that you elect to have all income, losses, credits and deductions passed through the shareholders. You may wish to do this in order to remove the second tier of taxation that a C corporation possesses. However, by becoming an S corporation the shareholders become liable for losses and taxes.
Requirements for S Corporations
The Internal Revenue Service imposes a number of conditions on the creation of S corporations. These include:
● There can be no more than 100 shareholders
● Shareholders must not be non-residents of the U.S.
● The company can only issue one class of stock
● Certain restrictions on the kinds of business the company can conduct are imposed. For instance, the company cannot provide insurance to consumers.
If the company in question already exists, you will need to restructure it before filing as an S corporation. It you are creating the business, you should begin by selecting shareholders who meet the requirements outlined above. You will need to have a main office address and name a registered agent who receives legal notifications for the corporation. You then need to request an articles of incorporation form from the secretary of state's office.
You will need to file the articles of incorporation as well as draft corporate bylaws. These will explain how the corporation is to be governed, including the number of directors, how notification of meetings will be made, etc. While it is not necessary that you file the corporate bylaws with your articles of incorporation form, you need to have them in case your company is sued. Finally, you will need to file a form 2553 with the IRS. This officially notifies the IRS that you are an S corporation.
For further Information or Legal Assistance
It is important that you take great care in the setting up of your S corporation to ensure that it meets all requirements. It may be in your best interests to hire a Bryan business attorney to assist in this task. Call
Peterson Law Group
today to arrange a consultation at