Costs involved in Setting Up an S Corp

Introduction

An S corporation is a special type of corporation that’s passed through to its shareholders on their personal tax returns. It offers several advantages over other types of corporations. For example, it provides more flexible tax treatment than traditional C Corporations and allows for more limited liability than LLCs or partnerships. However, setting up an S Corp can be complicated, especially if you don’t have the right guidance. This article will help guide you through some of the common costs associated with setting up an S Corp so that you can budget accordingly!

Consider these costs when setting up an S Corp

• Consider the following costs when setting up an S Corp:
• State filing fee
• Annual report fees
• Franchise taxes (if applicable)
• Office space.

State Filing Fee

The state filing fee is a one-time fee that varies by state and is required to set up an S Corp. It is not refundable.

Annual Report Fees

Annual report fees are required to be filed with the state. Typically, annual reports are due on the anniversary of your corporation’s incorporation (for example: if you incorporate on March 1st, then your first annual report would be due in March). Annual report fees vary by state but typically cost less than $100 per year and can be paid online or by mail.

Franchise Taxes

Franchise taxes are also paid to the state, but they’re based on the number of employees you have. This is another quarterly payment that must be made to your state government.

The federal tax ID number is a nine-digit number that identifies your business and helps you file your taxes. It is issued by the IRS and can be obtained online. Annual reports are required by law to be filed with the state and can either be filed online or by mail. Typically, annual reports are due on the anniversary of your corporation’s incorporation (for example: if you incorporate on March 1st, then your first annual report would be due in March). Annual report fees vary by state but typically cost less than $100 per year and can be paid online or by mail.

The amount of franchise tax you pay is based on a percentage of your revenue. For example, if your business’s revenue is $100,000 per year and you have five employees working 40 hours per week, then your annual franchise tax would be $1,200 ($100,000 x 5% = $5,000; $5,000 / 12 months = $416.66).

Office Space

If you’re planning to run an S Corp from your home, you’ll need a physical address. This can be your home address or another location that has some kind of office space attached to it.

You may also choose to rent out a virtual office (sometimes called a professional mailing address) where mail and packages are delivered on your behalf so that you can have an official-sounding address without having an actual office space. The cost varies depending on the location and services offered; for example, some companies will provide only mail forwarding while others also offer to fax services as well as phones lines with personalized voice messages directing calls back to wherever they originate from (e.g., “This is John Doe’s extension”).

If neither of these options appeals to you, there are other options: shared offices, which provide workspaces in shared environments; co-working spaces like Regus’ Business Centers; or even working out of coffee shops if all else fails!

Takeaway

When you’re ready to start your business, it’s important that you register your S Corp with the state in which it will operate. This can be done online or by mail and typically doesn’t cost anything unless you need an EIN number (see below). The costs to set up an S Corp are fairly minimal when compared with the costs of setting up a C Corp. The biggest expense is probably going to be the cost of setting up your business, which varies depending on what state you’re in and how much space you need. You may also have some initial legal fees for preparing contracts for your clients and employees (though you can probably get these reduced or waived by offering something in return).

Conclusion

While the costs can be considerable, there are ways to reduce them. You can find a low-cost office space in an industrial park or coworking space, for instance. And you may be able to save money by only hiring part-time employees at first while they get their footing with the business. Setting up an S Corp is worth considering if your business grows beyond its startup stage and needs more structure than an LLC offers—but before doing so, make sure that all costs have been accounted for!