How to form an S-corporation for yarns and threads


If you want to start a yarn business, you’ll need to form an S-corporation. This legal entity can help you protect your personal assets from creditors, but it also limits the amount of money that can be withdrawn from the business for personal use. An S corporation is closely tied to its owners: It cannot exist without them and all profits must be distributed among them, either directly or indirectly through salaries or dividends.

Choose a name for your business

  • Your company’s name should be easy to remember and reflect your business’s purpose. Do not use a name that is already in use by another company or one that might be offensive.
  • Make sure the proposed name is available for you to use as well—you can do this by searching the Internet with keywords such as “business names” or “corporation search engines.”

Form an S-corporation with the help of your attorney or accountant

  • Use your attorney and/or accountant to establish a corporation that has only one class of stock and no shareholders (an S-corporation).

Write a comprehensive business plan

You’ll want to include:

  • A description of the products and services that your company will provide, including how you plan to market them.
  • A detailed outline of how much money you expect your company to make in its first year, second year and third year (and beyond) after incorporation.
  • What kind of employee benefits you intend to offer — paid vacation time? Medical coverage? Retirement savings plans?

Choose an office location

It is important to find an office that is convenient for all employees and customers, as well as being accessible and visible. Consider the following factors:

  • Location: As with any type of business, you should seek out a central location within your industry’s trade area or client base. A good rule of thumb is that the closer it is to where people live, work, and play (e.g., recreation), the better off you’ll be in terms of customer traffic; however, if your company requires specialized equipment (such as large machines) or lots of materials/supplies coming in/going out, then proximity may not matter as much as accessibility.
  • Parking: You’ll want plenty of parking space near your front door; this will ensure that both employees and customers can easily access what they need from their vehicles without taking up valuable sidewalk space or forcing pedestrians into dangerous situations with moving vehicles on busy streets nearby (or worse yet—in between cars). This also means that employees won’t have far walk from their cars into work each day—and vice versa at night!

Discover the start-up cost of equipment and employee hiring

While this is important to consider, there are other costs associated with starting a business that are crucial to be aware of. These include start-up costs for equipment and employee hiring; space rental costs; advertising and marketing; business insurance; supplies and inventory.

The following sections will help you determine these expenses so that you can plan accordingly before getting started with your own company.

Learn how to use software to manage inventory, accounting and other aspects of your business

A good software system will allow you to automate many of the accounting tasks that would otherwise be time consuming and tedious. A software system can also help protect your business from mistakes, which is important when dealing with inventory. If you don’t have a reliable and easy-to-use software system in place, it’s best to hire someone who does.

Determine how you will manage your inventory

  • You can use a computerized inventory system or a manual system.
  • You can use one of the many free inventory software programs available online.
  • You can use a combination of both systems, keeping track of your inventory using pen and paper while using software to keep track of sales and purchases, but this will require more time and effort than other methods.

Obtain a vendor’s license (also called a “wholesale permit” or “seller’s permit” depending on your state)

It is a tax permit that allows you to collect sales taxes on items you sell from your place of business. It also allows you to make tax-free purchases for resale from wholesalers and manufacturers.

In order to apply for an S-corporation, it’s important that you understand what type of corporation you are going to form in conducting business activities, especially if it is an S-Corporation.


As you can see, starting an S-corporation is not too difficult. With the right information and a little time, you will be well on your way to running your business successfully.

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