How to form an S-corporation for Pharmaceuticals

Introduction

Pharmaceutical wholesalers are corporations that distribute prescription drugs to pharmacies. They purchase drugs from drug manufacturers and then sell them to pharmacies at a discount. These businesses require specialized business knowledge, including federal tax identification numbers (TINs) and employer identification numbers (EINs). In addition, pharmaceutical wholesalers must file articles of incorporation with the appropriate secretary of state’s office before beginning business operations.

Determine the activities that the corporation will perform

The activities that a corporation will perform are specified in the articles of incorporation. If you are forming a pharmaceutical wholesaler, it is advantageous to include this statement in the articles of incorporation: “The corporation will engage in the manufacturing, wholesale distribution and retail sale of pharmaceuticals.” This statement will help protect your business from competitors who might try to imitate what you’re doing by creating a similar company and causing confusion among consumers.

Decide who will serve on the board of directors

The board of directors is the governing body of your S-corporation. It is responsible for making decisions about how the company will operate and how it will address issues that arise. The members must have knowledge and experience in the business activities of your corporation, as well as good communication skills, since they are required to make decisions with limited input from others. They should also be able to make decisions in a timely manner without much direct oversight from management.

Decide whether to use an S-corporation election form

According to Internal Revenue Service rules, a corporation can choose to elect to be treated as an S-corporation by filing an S-corporation election form with the IRS. If the corporation fails to timely file the necessary paperwork and notify its shareholders of this decision, then such a mistake could result in significant penalties or fines for your organization.

The deadline for filing any required forms depends on when your business was started:

• If your company has existed for less than one year on April 15th of each year—the date when these forms must be submitted—then it is recommended that you submit them during January of that same year.
• If your business has been around more than one year but less than three years on April 15th each year, then it should be submitted during May; if more than three years old but less than five years old at this time (eighth month), then September would be best suited; if older still but under seven years old by September 30th each year (10th month), then December 31st would suffice as well.

File articles of incorporation with appropriate secretary of state’s office

In addition to general information about each corporation, such as its name, its officers and its business activity, articles of incorporation should also include tax information for the corporation, including federal tax identification numbers (TINs) and employer identification numbers (EINs).

The IRS issues TINs to corporations that qualify for federal tax exemption. If you’re forming a corporation in the United States, your company will be automatically assigned a TIN if you file articles of incorporation with the appropriate secretary of state’s office.

The EIN is different from the TIN and is required for all corporations when they start doing business or paying paychecks, regardless of whether they are incorporated in another state before moving across state lines.

Obtain federal tax identification number from IRS if necessary

A TIN is issued to most corporations automatically after filing articles of incorporation; however, it is a good practice to file for this number before starting business operations.

To be eligible for an S-corporation tax status, you must apply. This can be done by submitting the appropriate forms to the IRS or by filing Form 2553 with your state’s corporation office.

Obtain employer identification number from IRS if necessary

An EIN is used by employers for tax reporting purposes, such as reporting employment taxes and making quarterly payroll tax payments.

An EIN is also required to report wages paid to an individual who’s not classified as an employee under your business structure (such as if they’re considered a contractor).

Conclusion

Combining a strong business plan with the right corporate structure is one of the most important steps in starting a new company. It’s also something that should be done as soon as possible, so you don’t waste time and money on something that won’t work. As a pharmaceutical wholesaler, there are many different types of corporations available to you. The S-corporation is one option that allows you to operate under favorable tax laws while still keeping your personal assets separate from those of your company.