Setting Up an S Corporation
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.
Costs of Setting Up an S Corporation
- Articles of Incorporation filing fees: Typically $100 to $250
- Corporate Seal: $50
- Payroll processing fees: Over $45 per month
Considering an S Corporation
Before you form an S corp, consider factors like whether an S corporation is the best strategy for your business, requirements, and restrictions. An LLC structure may be a better option. Assess if S corporation tax benefits align with your needs.
The main difference between an S corp and a C corp is in their taxation methods. C corps are taxed at the corporate level first, followed by shareholders paying taxes on dividends. In contrast, an S corp passes income directly to shareholders.
Once approved, you will receive Notice CP261. File Form 1120S with the IRS each tax year and a state S Corporation tax return, if applicable.
An S-corp provides owners with three payment options: salary, distributions, or both. Choose based on financial considerations. The structure also offers personal asset protection. Unlike partnerships, S corporations do not require specific owners to pay self-employment taxes.