How to form an S-corporation for Clothing

Introduction

If you want to start a clothing business, one of your first questions should be how to form an S corporation. This article will walk you through the steps of forming an S corporation as well as some important considerations for small businesses.

Choose a name for your corporation

Your corporation’s name must be unique; you can’t just use any old thing like “Luxor” or “Checkered” and expect it to fly with the state of California.

Your name must also not be confusingly similar to the names of other businesses that are already active in the state (so avoid “John Doe Clothing Co.”). If there are competing businesses with similar names, then potential customers might confuse one for another, which could lead them right into your competitor’s waiting arms! It’s also just generally bad practice to use someone else’s brand identity without permission or license from them so don’t do it!

Finally, make sure your new company name isn’t offensive or obscene—if you’re going down this route then maybe reconsider if this is really where you want things headed?

File an application with the secretary of state’s office to form a corporation

In most cases, this is a simple process that can be completed online and costs about $100.

Once you’ve filed, it will take at least 30 days for the corporation’s charter to be approved. During this time, you should complete all of the paperwork required by your state (such as payroll tax forms) and secure any licenses or permits that may be required for running your business.

Once your corporation has been officially established as an S-corporation in good standing with its state government, it will have its own unique tax identification number (TIN). This number should be used whenever filing taxes or other paperwork on behalf of the corporation; using any other TIN could result in additional penalties or fines from both local governments and federal agencies like the Internal Revenue Service (IRS).

Draft articles of incorporation

An S-corporation can be formed using either state articles of incorporation or federal articles. As long as you follow all applicable state rules, you may choose whichever route you prefer. Each option has pros and cons—for example, some states require additional fees for doing things like publishing notices or issuing stock certificates—so we recommend consulting with an attorney before proceeding down either path if possible.

To draft articles of incorporation:

• Drafting Articles — Under New York State law, your company’s name will need to include one or more words indicating that it’s an S Corporation rather than another type of corporation such as LCC, LLC or PC (public benefit corporation).

Obtain an employer identification number

An EIN is a unique tax identification number that allows you to collect and pay taxes on behalf of your business. You can get an EIN online through the IRS website. The IRS offers applications in Spanish and English, as well as other languages. The application process takes about five minutes and does not require proof of identity or citizenship.

Determine the corporate structure

You have a choice of corporate structures: an S corporation, C corporation, LLC or partnership. Each has its own benefits and drawbacks. The most common choice is an S corporation because it offers tax advantages while keeping the company owner’s personal assets off the table if the business fails.

An S corporation must meet certain requirements in order to be eligible for this election; otherwise, you can choose any other corporate structure that suits your needs and goals best.

Issue stock

• Stockholders are the owners of the company and entitled to a share of the profits.
• Shareholders can also be issued dividends, which means that some or all of their outstanding shares are paid in cash or other property instead of being added to their accounts as new shares.

Create corporate bylaws

They’re typically drafted by an attorney, who will also review them before they’re adopted. By-laws should be in writing and filed with the state so that they can be accessed by others if needed later on.

Takeaway

The S-corporation is a type of corporation that is taxed like a partnership. In other words, the company does not pay any federal income tax at the corporate level; instead, it passes through its profits and losses to shareholders who report them on their personal income tax returns.

The benefit to you as an artist: You won’t pay any more in taxes than if you were operating your clothing business as a sole proprietorship or partnership.

Conclusion

Forming an S-corporation is a straightforward process. By following the steps outlined in this article, you should be able to create your own corporation within two weeks of beginning the process. Keep in mind that it’s important to understand how taxes work when you form your new business so that you don’t end up paying more than necessary on your corporate income or personal income taxes.