How to form an S-corporation for Advertising and Business
If you’re a small business owner or in the process of starting a company, one of the most important decisions is deciding how to structure your business entity. There are several options to choose from, and each has its own advantages and disadvantages. One way to protect your personal assets is through an S-corporation—also known as a subchapter s corporation or just an S-corp. This type of corporate structure is often used by advertising agencies because they have more flexibility than other types of businesses when it comes to hiring employees and paying taxes. In this article, we’ll explain what an s-corporation is, how it protects you financially if something goes wrong with your business, and some things you should consider when forming one for yourself or someone else!
S-corporations are business entity that protects your personal assets in the event of lawsuits and debts
Unlike a C-corporation, an S-corporation is not taxed at the corporate level so you don’t have to pay double taxation. You also have more freedom to run your business as you see fit without having to submit to shareholders’ demands or restrictions. S-Corporations are good for small businesses that want to limit their liability, but still want to own profits and losses as a separate entity from their owners (shareholders).
There are a few requirements to becoming an s-corporation, so make sure you meet them before applying
In order to form an s-corporation, you must meet the following requirements:
- You must be a U.S. citizen or resident alien. If your company is owned by non-resident aliens, the company will not qualify as an s-corporation unless it has elected to be taxed as a domestic corporation on its federal income tax return.
- Your business entity must be valid under state law, if applicable.
- You cannot have more than 100 shareholders in total.
- The IRS requires that you file Form 2553 with your state’s Secretary of State before you can apply for corporate status—this form is known as the application for exemption from federal income tax under IRC section 1372(a) (1). After filing this application, you will get a notification from the IRS about whether or not your request has been accepted or denied within 60 days.
- You must have both a business purpose and intent when forming an s-corporation; this means that if you only want to form one because it’s easier than incorporating under another type of business structure (such as LLC), then don’t do it!
An S-corporation is often referred to as a subchapter s corporation and sometimes just an S-corporation
S-corporations are unique because they protect the owners of the business from personal liability for their debts and lawsuits. The shareholders, or owners of the company, have no personal liability for debts or lawsuits associated with their business.
File your paperwork with the Secretary of State
To become an s-corporation, you need to file paperwork with the state where your business is located. For example, if your business is located in San Francisco, you would file your paperwork with the Secretary of State.
The requirements to form an s-corporation vary by state but include:
- A board of directors that oversees operations and makes decisions
- Shareholders who own stock in the company
- Officers who manage day-to-day operations
An s-corporation is a great way to protect yourself and your business, so consider filing today!
An S-corporation offers the following benefits:
- Personal protection. An s-corporation is considered a pass-through entity for tax purposes, which means that the corporation itself isn’t taxed at the corporate level. Instead, you’ll pay taxes on your personal income from running the business (but not from any investments or passive income). This can help shield a significant amount of your assets from creditors or lawsuits.
- Business protection and asset protection. If you own stock in an s-corporation, it’s protected as well—and even if you don’t own any shares but were hired by one of these companies and paid with checks that came directly from their bank account (as opposed to paycheck stubs), there’s still no risk since those funds would be protected under creditor laws anyway even if they had come directly out of the company owner’s pocketbook instead of into theirs (which they likely did!). This means that even though most people don’t invest directly into these types of businesses because it doesn’t make sense financially unless you have millions coming out every single year after expenses–it’s still worth keeping them around just for peace of mind alone!
We hope this article has been helpful in understanding the benefits of forming an S-corporation. If you have any questions or concerns, please contact us at our office or by email and we will be happy to assist!