How to form an S-corporation for Scientific Devices

Introduction

If you’re considering incorporating your business, you may be wondering how to form an S-corporation. An S-corporation is a corporation that passes through its profits and losses to the individual shareholders and pays federal income tax on its net income. This means that if an S-corporation makes a profit, the corporation does not pay federal income tax on the earnings until it distributes those earnings as dividends to shareholders. If an S-corporation has losses or expenses, those are passed through directly from the corporation to shareholders.

Determine your reasons for forming a corporation rather than other types of entities

Whether you should form a corporation for your scientific device business depends on your reasons for doing so. If you’re concerned about liability, a corporate structure is an asset to the business. You can also get tax benefits from forming an S-corporation, compared to other types of entities like a limited liability company (LLC) or partnership.

Corporations are typically used by larger companies because they have more complex needs and operations than small ones do. However, if your organization doesn’t need these features yet but may in the future—and if you think incorporating will help attract investors or partners—then now might be an ideal time to become incorporated into an S-corporation.

Select the state where you want to incorporate

The first step in forming an S-corporation is choosing the state where you want to incorporate, and this process involves many considerations. Discuss your options with an accountant or tax attorney to see which state offers the best overall package of state tax laws, regulations and requirements, corporate law, filing fees, etc.

Name the corporation

Once you have decided on a name for your corporation, it’s time to make sure that it’s available. First, check with the state where you will set up your business and see if the name is available. Your state may have strict rules about what kind of names can be used by corporations in its jurisdiction.

Select the type of corporate structure

Choose a corporate structure that best fits your business. You may have heard of a few others, such as C-corporations and LLCs. Here are some pros and cons of each:

• S-corporation: This is a corporation in which all shareholders own part of the company and receive profits according to their shares. It has a maximum life span of 15 years, but can be renewed for another 15 years if necessary.
• C-corporation: This designation refers to how much personal liability you have when running your business—in other words, whether or not other people can sue you personally if they’re wronged by or injured from something related with your business.

Choose directors and officers

You must choose a president, treasurer and secretary. These positions are considered officers and are typically appointed by the board of directors when setting up your company. The president is usually the highest-ranking officer, although some companies also appoint a vice president or chief operating officer to handle day-to-day operations. The treasurer typically oversees finances for the corporation, while the secretary handles legal matters such as filings with state government agencies on behalf of S corporations. You may have to select other officers depending on how many people are involved in your business.

Establish how many shares of stock will be authorized, issued and outstanding and what class of stock they will be

For example:

• The corporation’s board of directors has decided that the corporation will have one class of common shares with a par value of $0.01 per share. The board also decides that 500,000 shares are to be authorized and issued. There are no plans for additional classes or series at this time.

The corporation’s Articles of Incorporation should reflect this decision as follows: “The total number of shares which the corporation shall have power to issue is 500,000”.

Complete and file the articles of incorporation with the appropriate state filing office, along with any required fees

You will need to file the articles of incorporation with the state filing office. The filing fee varies by state. If you need to amend your articles later on, contact the filing office and ask them how much it would cost: they may charge additional fees depending on what changes are being made or how many entities are involved in those changes.

Conclusion

If you are unsure of how to complete the filing process for your S-corporation, contact an attorney or accountant who specializes in corporate formation. If you are seeking legal assistance, make sure that the lawyer or accountant has experience in helping clients create new business entities. An experienced professional can answer any questions that may arise during this process and ensure that all documents are filled out correctly and filed on time.