How to form an S-corporation for Healthcare


S-corporations are one of the most popular legal structures for small businesses. They offer great tax benefits and are relatively simple to form, so you can get up and running in no time. But if you’re considering an S-corporation for your healthcare business, it’s important to understand how these entities work before incorporating.

These steps will help:

Determine the structure of your business

The first step in forming an S-corporation for healthcare professionals is to choose the suitable structure of your business. The following table compares the characteristics of a sole proprietorship, partnership, limited liability company (LLC) and corporation:

  • Only one owner can be involved.
  • No restrictions on who can be partners or members.
  • Restrictions on who can be shareholders; usually family members only.
  • Fewer restrictions on how money is collected from owners or members; often collected through a K1 tax form each year by filing 1065 with IRS instead of paying self employment taxes every quarter like sole proprietorships and LLCs do.

Name your S-corporation

  • Decide on a name for your corporation. To keep things simple, you can use one word as the name of your S-corporation.
  • Designate an address where official correspondence will be sent. This should be the primary business address for all communications with your state government and IRS agents, including tax filings and annual reports.

Register your business with your state

The process varies by location, but you should be able to find information about it online.

You’ll also need to obtain a tax ID number for your new S-corporation. You can do this either through the IRS or through your state government, depending on which is more convenient for you.

Finally, you will need to open a bank account in your company’s name as soon as possible so that there is an easy way for clients and vendors to pay their bills without having to send checks made out directly from their personal accounts.

File articles of incorporation

These documents usually include information about the company, its purpose, and its officers. In most cases, they must also list all shareholders who own at least 5% of the business.

To get started on this process, go online and search “file articles of incorporation” in your state’s website. You may be able to do it yourself or hire an attorney to help you through it; either way, it shouldn’t take more than a few minutes once you’ve printed out all necessary documents and filled them out properly.

Create corporate bylaws

They’re the rules that govern how your corporation will operate, and they are required by law. These documents should include information like:

  • The name of your corporation
  • The number of board members who will oversee it.
  • How often board meetings will be held, and how those meetings are scheduled
  • Any restrictions on who can be a shareholder

Hold an organizational meeting

The organizational meeting is the first formal meeting of the shareholders and an opportunity to approve your bylaws, elect officers, and discuss how you plan to handle conflicts. It’s also a good time to set goals for the business.

Here are some quick tips for holding an effective organizational meeting:

  • If there’s one shareholder in your company, that person can hold this initial organizational meeting. If there are more than one shareholder, they should all attend and vote on important issues like selecting an operating agreement.
  • At this point in time it doesn’t matter who owns what percentage of shares because no distributions have been made yet.
  • To make sure everyone understands their role as part of S-corporation management team, ask presenters from each departmental head.

Obtain an employer identification number (EIN)

You can apply for one online if you don’t already have one, and it will be issued immediately. The application process takes less than five minutes and costs nothing—but you’ll need to submit some basic information about your business, including its legal name, address, type of business entity.

Decide on employee benefits

  • Health insurance. If you offer health insurance to your employees, you’ll have to decide how much of the premium each employee will pay. You can set up the plan so that the entire premium is borne by you—and then deduct it from their paychecks—or split it between you and them.
  • Paid time off. Paid vacation and sick days are a nice perk for workers, but they come with some serious complications in an S-corporation situation.

S-corporations are great legal structures for small businesses, so use these steps to incorporate yours today!

There are a number of reasons why S-corporations are great legal structures for small businesses. They’re easier to set up than C-corporations, have fewer tax requirements than C-corporations, and can have more than 100 shareholders—something that’s not allowed with a traditional corporation.


This guide should help you get started on the right path to forming an S-corporation. If you have any questions or need more information, please contact us!

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