How to form an S-corporation for Legal and Security

Introduction

If you’re starting a new business, one of the first things to consider is whether you should form an S corporation. Forming an S corporation can offer many benefits, including limited liability protection and flexible management. Let’s take a closer look at how to choose between forming an S corporation and another type of business entity, like a limited liability company (LLC).

Form an S Corp by Choosing a Name

Choose a name that is not already in use. A name that is unique and not taken by any other business. It must be sound and clear and should directly deliver the message of what service you are offering.

File your Articles of Incorporation with the state

The filing fee is $50, and you need at least one stockholder and one director if you are setting up an S Corp for the first time or adding an additional shareholder/director to an existing corporation that has already been established as an S Corp.

Get an Employer Identification Number for Your S Corp

You’ll need to register for an Employer Identification Number (EIN), which is a unique number for your business. You can apply for the EIN over the phone or online.

You’ll use this number whenever you open a bank account for your company and when paying any type of tax or fee associated with running your business as an S Corp, including taxes on dividends and distributions from your company to you.

Establish Corporate Bylaws for Your S Corp

Corporate bylaws are the set of rules that govern a corporation. These rules become part of the corporate charter and are intended to keep the corporation operating smoothly.

What Is a Corporate Secretary?

A corporate secretary is someone who oversees legal, financial, and administrative aspects of a company’s operations. They provide services such as keeping minutes from meetings, preparing tax returns, and arranging insurance coverage.

Issue Stock to Yourself and Any Co-Owners of Your S Corp

Stock is the ownership interest in a corporation, and stockholders are the owners of a corporation. Stock is not issued until you have a business plan and need to raise money. If you’re just starting out, though, it might be difficult to get investors excited about your company if they can’t see any value in your future offerings.

So what do you do? You can issue stock to yourself and any co-owners of your S Corp right away without any legal trouble so that there’s no ambiguity about who owns what percentage of the company.

The Benefits of Creating an S Corporation

• Tax benefits.
• Legal protections.
• Limited liability.
• Management flexibility.

Advantages of Forming an S-corporation

In general, partnerships do not pay corporate income tax on profits and losses; instead they pass through those taxes to their members (owners) who report them on personal returns. In contrast, if you form an S corporation or C corporation because you want to avoid paying personal income taxes on profits generated by your business – then it may be financially beneficial for your company to pay such taxes instead of passing them through as distributions for each shareholder — but this is something that you should discuss with your lawyer before deciding whether or not how much money should go into building up reserves against future liabilities rather than being distributed directly among shareholders each year..

Limited Liability

There are two main reasons to form an S corporation:

• This means that you do not personally assume responsibility for the debts of your business; if you were a sole proprietorship or partnership, you would be liable for those debts (and only your personal assets would be at risk). You might want this protection if you’re worried about being sued or having to pay out legal settlements due to the nature of your business activities. However, creditors can still take action against you if they believe that the company’s debts resulted in fraud or other illegal actions by members of management. If it’s important to maintain some level of personal liability protection beyond what limited liability provides, consider forming an LLC instead.

Management Flexibility

• How to structure the company
• How to set up the board of directors
• How to set up the shareholders
• How to set up officers, shareholders’ meeting and annual meeting

Takeaway

Forming your own business entity is a great move if you want legal protections and tax benefits.

Conclusion

You can use your S corporation to protect yourself from personal liability, pay less in taxes and even save on many types of expenses. However, it’s important to remember that the process for forming one is complex and requires some up-front research before filing any paperwork with the state where you live or operate. If you’re considering this type of business structure for yourself or your company, be sure to work with an attorney who specializes in corporate law so they can help guide you through every step along the way!