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- To start your S-corp, fill out articles of incorporation with your company’s information and file Form 2553 through the IRS. Your company must have no more than 100 shareholders and one class of stock.
- Once approved, you will receive Notice CP261. You’ll then need to file Form 1120S with the IRS each tax year and a state S Corporation tax return, if applicable.
- The main difference between an S corp and a C corp is how each is taxed: C corps are taxed first at the corporate level, then shareholders pay taxes on dividends. An S corp passes income directly to shareholders.
- The costs of setting up an S corp include: Articles of Incorporation filing fees, typically around $100 to $250; Corporate Seal, usually around $50; Payroll processing fees vary but expect at least $45 per month.
- An S-corp offers owners three options for paying themselves: by salary, distributions, or both. The right choice depends on finances and contributions.
