How to form an S-corporation for Food


Starting a food business can be confusing, but here are the steps you need to follow when forming an S-corporation.

Starting a food business can be confusing, but here are the steps you need to follow when forming an S-corporation

  • Get a federal EIN.
  • Create an operating agreement.
  • Keep corporate and personal finances separate in all cases, even when you own the business with your spouse or partner; this is especially important if you have already incorporated, since the IRS will look at both kinds of money as personal income when determining whether to tax your corporation as an S-corporation..
  • Elect to be taxed as an S corporation by filing Form 2553 with the IRS within two months of incorporation.
  • Open a business bank account for your new company immediately after incorporating it (and before doing anything else), even if you plan on paying yourself out of pocket for some time until your first sales come in from customers—you’ll want to keep those funds separate from any personal accounts so that they remain clear of any potential liability problems down the road!

Choose a name for your S corporation

Your company’s name will be one of the most important decisions you make, since it needs to be unique and descriptive enough to avoid confusion with other companies or products. Your business’s name cannot include the following:

  • A word that describes a product or service (e.g., insurance, auto parts)
  • A word that is similar to another company’s trademarked name (e.g., Apple Computers)
  • A personal name or nickname (e.g., John’s Plumbing Service).

Get a federal EIN

You can apply for an EIN online, over the phone or by mail or fax. If you’re looking to save time and hassle, consider going through the process of obtaining a new federal tax ID number in person at your local IRS office. The address and phone number for your nearest service center can be found on their website.

Create an operating agreement

An operating agreement is a document that explains how your business will be run. It can include rules about how much money the company can spend, who has access to the accounts, and what happens if someone leaves the company. You should also have an operating agreement if you have more than one owner in a corporation or if your business has employees.

The exact contents of an operating agreement vary depending on the needs of each startup, but there are some basic elements that every S corporation should have.

Keep corporate and personal finances separate

S-corporations are a popular choice for small businesses in part because they shield the owners from personal liability. This means that if your company owes money, an S-corporation’s creditors can’t come after you personally to collect it. And if one of your customers sues you for a product or service failure, he can only sue the business and not its owner.

An S-corporation also shields its owners from tax obligations. For example, say a customer comes into your grocery store one day and buys $100 worth of groceries with his credit card. Under federal law (IRC §1366(d)(2)), if you’re an S-corporation owner who used the grocery store as part of your business activities—and not just as a side hustle—then any income earned by selling those groceries will be taxed at corporate rates instead of personal rates.

Elect to be taxed as an S corporation

If you want to organize your business as an S corporation, which is the most common choice among food businesses, you will need to elect that status. In some states there are restrictions on when this election can be made and how it’s done. If you find yourself in a situation where this election does not make sense for your company—for example if it’s going bankrupt—you may regret having made it in the first place.

It’s also important to realize that even though taxes are paid at individual rates rather than corporate ones under section 1374(a), those taxes still generally come out of corporate profits.

Open a business bank account

You can use an existing personal account, or open a new one specifically for your business. Open the account before you start making deposits, so that you’ll have an easily accessible record of income and expenses. You should also set up direct deposit with the IRS, which will make paying taxes simpler when it comes time to file them.

Get any necessary permits or licenses for your new business

If you’re opening a restaurant, this is likely not necessary. But if you’re operating a food truck, then yes: You will need to get the appropriate permits and licenses to operate your vehicle.

New York City, for example, food trucks are subject to the same regulations as restaurants — which means that each one must display its permit prominently on its vehicle.

In some states it’s illegal not only to operate without proper licensing but also merely set up shop without registering first with local regulators — so getting going could be one step closer than expected!

Forming an S-corporation is a great way to protect yourself from liability and expand your company in the future

There are two main ways that you can form an S-corp: by starting one from scratch with all of your assets, or by converting an existing LLC into a corporation. The latter is the more common way of doing it because it allows you to keep many of the benefits of owning an LLC while gaining some additional protections as well.


We hope this article has been helpful for you. If you have any questions about forming a food S-corporation, please contact us here.

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