How to Form an S Corporation in Vermont

Introduction

A corporation is a legal entity that provides protection for personal assets. It can also be used to limit liability for the actions of shareholders and officers. A corporation can be formed in Vermont as an S corporation, which allows you to use pass-through taxation. In this article we will go over some of the steps involved with forming an S corporation in Vermont.

Verify That Your Corporation Qualifies as an S Corporation

An S corporation is a unique business structure that allows you to avoid double taxation. The IRS looks at your company as a pass-through entity, meaning you don’t pay corporate taxes on earnings, but rather on personal income tax.

To be an S corporation, your business must:

  • Be an eligible domestic corporation (or LLC) with less than 100 shareholders
  • Have no more than one class of stock with no voting rights
  • Only have shareholders who are U.S. citizens or residents

File Articles of Incorporation

Articles of incorporation are a formal set of papers submitted to a government agency to formally record the formation of a corporation. The firm’s name, address, agent for service of process, the number and kind of shares to be issued, and other essential details are typically included in the articles of incorporation. The corporation is created legally through the articles of incorporation.

Apply for an Employer Identification Number

You’ll need to apply for an Employer Identification Number (EIN) before you can apply for an S corporation. The EIN is a nine-digit number that the IRS assigns to sole proprietorships, partnerships, corporations, and other business entities.

Set up a Corporate Meeting and Draft Bylaws

  • Bylaws are the rules that govern your corporation. The bylaws should address such matters as how meetings will be called and held, how decisions will be made, and whether shareholders can remove directors from office.
  • You’ll need to have at least one annual meeting of shareholders. The board of directors can call additional meetings as needed—for example, if there’s a special item on the agenda that requires shareholder approval.
  • The corporate secretary acts as secretary to all meetings of shareholders or members (in an LLC). He or she also keeps minutes of shareholder or member meetings, files with state authorities any reports required by law, receives copies of any documents mailed to shareholders in accordance with state law, keeps a record book containing original signatures on all stock certificates issued, receives new stock certificates when owners transfer ownership interests in their businesses, forwards ballots sent by mail by owners to those authorized by them through proxies or voting instructions given previously, and maintains current records for each shareholder/member.

Maintaining Records and Financial Statements

It’s important to keep accurate records and financial statements for the business. You should also keep a record of any changes in structure, ownership or officers.

Conclusion

Forming an S Corporation in Vermont is a great way to start your business. But, starting a new business can be challenging. Following these steps will make it easier for you to form your S Corporation in Vermont and get started on the right foot.

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