How to form an S-corporation for Sports and Recreation

Introduction

An S corporation is a company that has been formed under Subchapter S of the Internal Revenue Code. The primary benefit of an S-corporation is that it shields profits from taxation at the corporate level, which means your business will pay income tax only on its net taxable income. In addition, there are certain tax benefits available to owners of an S-Corp. But before you can have any of these benefits, you must form your corporation correctly. Here’s how:

Decide on the name of the business

This will help people find your business online. Be sure that your chosen name is not already being used by another company—you can check this with your state’s secretary of state office. Also be aware that there are some words and phrases that cannot be used as part of a company’s name.

Also, make sure your company name does not have any offensive or confusing connotations so that it won’t raise any red flags when someone sees it or hears about it from a friend or acquaintance who has heard about the business from someone else who knows someone else who works there.

Create bylaws for the S-corporation

  • Bylaws are rules that govern the internal operations of the corporation. They should be created and approved before you form your company, but they don’t have to be filed with any government agency. You may want to review your proposed business plan with a qualified attorney to ensure that you’re meeting all legal requirements when creating bylaws.

Appoint a registered agent for the company

The agent serves as the company’s point of contact with the state and can accept legal notices on behalf of your business. Your registered agent is a person or business entity that is authorized by the Secretary of State to act on behalf of your corporation in matters involving official documents, such as annual reports or amendments to articles of incorporation, or lawsuits filed against you.

Elect directors for the S-corporation

The number of directors that you can have varies by state, but it is typically between one and three. Directors are in charge of managing your LLC’s operations on a day-to-day basis. They can be owners, employees or even independent contractors.

It’s important that all eligible voters be able to vote for directors.  Generally speaking, this means that each member must receive an equal vote count unless some kind of tiebreaker rule is set up in advance.

Hold an initial meeting of the board of directors

  • When to hold the meeting: The board of directors’ initial meeting should be held before any business is conducted.
  • Who should attend: All current board members, along with any new directors that were elected at the annual meeting. In addition, your corporation’s attorney may attend this meeting in an advisory capacity if he or she has not been invited as a director.
  • What to discuss at this first meeting of the board of directors and when to hold it: The agenda for this initial gathering can be fairly open-ended since you’re just getting started; however, there are some topics that you should include on your agenda if they apply in your case. In particular, make sure that you have enough time during this initial gathering for everyone involved in your new S Corporation’s operation to sign off on their official roles within the company.

Elect corporate officers, such as president and treasurer

Corporate officers are those individuals responsible for carrying out the day-to-day business of your organization. These individuals hold different titles depending on your state or country’s laws, but they typically include a president and treasurer (or secretary). You can choose any person who meets these requirements:

  • Must be an adult
  • Cannot be related to another officer within two degrees of consanguinity or affinity (blood relations like parents, grandparents, siblings)
  • Cannot have been convicted of a felony offense

Obtain a federal Employer Identification Number (EIN)

Once you have your EIN, you’ll need to use it when opening a business bank account and when filing taxes with the IRS.

Select “Online” and click Start Your Application Now. Complete all required information on this page, including your SSN or Taxpayer ID number, name as registered with social security administration (if different than SSN), other names used by you or your business (including any doing business as), city where located, state where located if not same as ZIP code, mailing address if different from physical location address provided above and country of incorporation if applicable. Click Continue once all required fields are filled out completely without errors.

Open a bank account in your corporation’s name

When you’ve chosen a bank and opened your account, it’s time to make some deposits. You’ll need to deposit enough money in your new account so that you can cover all of the expenses associated with starting your business and still have enough left over for you to live on while things are getting off the ground.

Make sure you have adequate business insurance coverage

The good news is that, unlike many other businesses, you can get by without any insurance coverage at all. However, if you want to protect your business from lawsuits and other legal claims (which is a good idea), then it’s important that you have adequate business insurance coverage.

In general terms, an S-corporation has the same types of insurance needs as any other company. For example:

  • General liability insurance protects against potential claims involving bodily injury and property damage caused by your employees or subcontractors while they’re working on your behalf.
  • Product liability insurance helps cover costs related to claims resulting from injuries associated with products sold by the corporation.

Conclusion

If you have a sports or recreation business, S-corporation status can be an excellent way to go. It gives you flexibility and control over your finances, as well as potential tax benefits. This is especially true if your business does not offer products or services that are covered by state sales tax.

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