How to form an S-corporation for Education

Introduction

An S Corporation is a formal type of business structure that allows businesses to pass through income and losses, while shielding the owners from personal liability. It’s also subject to tax rules that are more favorable than those for other types of corporations. A corporation can be an S Corp if it meets any one of the following requirements:

• Less than 100 stockholders (including family members).
• No more than 75 percent of your shareholders are nonresident aliens.
• An eligible corporation can elect S Corp status with only one class of stock.

What is an S Corporation?

The difference between the two is that an S corporation is taxed as a pass-through entity and it’s not subject to double taxation.

To understand what this means, you need to know that most corporations are taxed at both the corporate level and at the shareholder level. That’s called double taxation—when your business pays taxes on its income, then when you get paid as a shareholder you pay taxes again on those profits.

Who can become an S Corp?

S Corporations are a great legal structure for small businesses, but not all small businesses can take advantage of them. There are strict requirements for becoming an S Corporation. A business must meet these criteria:

• The corporation must be domestic (based in the United States).
• It cannot have any more than 100 shareholders.
• All shareholders must be individuals or other corporations that are classified as C Corporations, and they must be US citizens or residents. If you want to make the change from a sole proprietorship to an S-Corporation, you should consult with your tax advisor first. Here’s what he or she will tell you

How to form an S Corp?

An S-corporation is a special type of corporation that has some tax advantages. A corporation is an entity separate from its owners, and it pays taxes at the corporate level. An S-corporation is a corporation that elects to be taxed under subchapter S of the Internal Revenue Code.

File Articles of Incorporation

The most important thing to know about an S corporation is that it’s a pass-through entity. This means that the business itself doesn’t pay income tax. Instead, the profits and losses of the business are passed through to you and your shareholders (if you have any), who then report those profits or losses on their own personal income tax returns.

When you form an S corporation, you must file articles of incorporation with the state in which your business will operate. These articles should include:

• Your name and address
• The name of your new company
• The type of corporation (typically “S”)
• The purpose for which this corporation was created (which can be anything)

Create Bylaws

Bylaws are the rules that govern an S-corporation. They are similar to articles of incorporation, except they do not have to be filed with any government agency, such as the state or federal government. Because they do not need to be filed with a governmental body, they are often referred to as internal or private documents.

When creating bylaws for your business entity, you’ll want them to include:

• The name of your corporation in full (this should match what is on your articles of incorporation)
• A statement regarding where its principal place of business is located (this should match what is on your articles of incorporation)
• How many directors will serve on its board (you can set this number anywhere between one and fifteen)

Obtain a Federal Employment Identification Number (EIN) from the IRS

The EIN is a nine-digit number that identifies your business and can be obtained by completing an application on the IRS website. You will need an EIN to open your bank account and file taxes for your corporation.

Once you have created the business entity, you are ready to apply for your EIN by submitting Form SS-4 through the IRS website or by mailing in Form SS-4 with all required attachments.

Hold Initial Meetings and Elect Officers

The board of directors is the governing body of your corporation. It consists of one director (you), and additional directors can be added at any time. The board is responsible for voting on major issues affecting the company, such as mergers, acquisitions, or strategic changes.

The officers are responsible for running day-to-day operations within the company. They include a president, secretary, treasurer and any other officers that may be named by your state or local jurisdiction.

Takeaway

If you’re interested in forming an S Corporation for education, all the information you need is right here. We’ve got everything from how to form an S Corp and why it’s a great option, to how it works and what you need to consider before making your decision.

Conclusion

As you can see, there are many advantages to forming an S corporation. If you’re interested in learning more about how to form an S corporation, feel free to get in touch with us!