How to form an S-corporation for Shipping and Travel

Introduction

Shipping and travel-based businesses can be difficult to start, but they also have the potential for high profits. A company that specializes in shipping or travel will need to consider how it should be legally organized before it can operate as a business. If you are starting an S-corporation as part of your shipping and travel business plan, here are some steps to take:

Find a name for the company

This can be done by searching the internet or using other methods, such as talking with an attorney or accountant. The name should be available and not already in use by another business, it should fit with your business’ image, and it must be easy to remember so that customers can easily recall where they heard of your company.

The last thing you want is for someone else to have the same name as yours because this will confuse people and lead them astray when they try to navigate their way through Google searches. If there are several companies with similar names in different areas—for example, “Travel Agency” vs. “Travel Agency”—you may want to consider changing yours so that there aren’t any misunderstandings.

Decide what type of business you will run

The S-corporation is a pass-through tax entity that can be used for any kind of business. As the shareholder, you are taxed on your share of the income and expenses that pass through your company’s books. You do not pay taxes at the corporate level; instead, all profits and losses are passed through to shareholders in proportion to their ownership stakes.

Draft articles of incorporation

The articles of incorporation are the legal document that establishes your business and outlines its purpose, structure, and management. The articles must include a few key pieces of information:

• The name of your corporation is in accordance with state law.
• The business’s corporate purpose (for example, “to manufacture and sell sporting goods”).
• A statement about how shareholders’ equity will be distributed among them (for example: “We’ll divide up our shares according to how much money each person put into the company,” or “We’ll distribute them equally among ourselves”). You can set up a shareholders’ agreement later if you want more detailed rules for this.

Apply for an Employer Identification Number (EIN)

You apply for an EIN in order to open up a bank account or conduct business with the IRS. You can apply online if you have access to a computer and an internet connection. If not, you can call the IRS, visit one of their offices in person, or fax or mail them Form SS-4.

After you get your EIN, put it on all forms that require it so that no one else will use it.

Create an operating agreement

This is not only a good idea because it’ll help protect you from lawsuits and other problems, but also because it can help you avoid the IRS’ close scrutiny of your company by making sure that things are running smoothly.

The operating agreement should be in writing and signed by all shareholders (or owners). It’s also a good idea for each shareholder/owner to keep their own copy of the document so there aren’t any disagreements about what was agreed upon when changes need to happen.

Choose the fiscal year for your corporation

• The fiscal year is used to determine your income and expenses in a given year. If you choose a different fiscal year from the beginning of January through December, then you’ll need to use it when preparing your tax return.
• If you decide to switch from an S-corporation tax form (Form the 1120S) with an annual close date based on its chosen corporate tax calendar year to one that has quarterly closings, then you must also change its accounting method so that everyone involved understands how it operates:

Consider employee roles

While you can hire employees, you are not required to do so. However, if you do employ workers for your business, it is essential that they be covered by workers’ compensation insurance. You will also need to pay payroll taxes and withholdings.

You will need to decide how much control over your employees’ work lives you want. If possible, try to make sure that both parties understand what their responsibilities are in order to avoid conflict down the line when it comes time for more serious issues like salary negotiation or promotion requirements.

Check on tax status with IRS

The IRS has a page dedicated to corporate tax status, and the state has a website with links and information about S-corporations. You can also check with the local office of your state’s revenue department to see if you need to file additional forms or pay special fees for an S-corporation.

If you are unsure where to go next, contact a tax professional for advice on how to form an S-corporation for shipping and travel.

Conclusion

If you’re ready to move forward with your shipping and travel business, contact a tax attorney or accountant who can help guide you through the process of forming an S-corporation.