Setting Up an S Corporation
To start your S-corp, fill out articles of incorporation and file Form 2553 through the IRS. Your company must be U.S. based with 100 shareholders or less and one class of stock.
Costs of Setting Up an S Corp
Costs include: Articles of Incorporation filing fees, typically $100 to $250; Corporate Seal, usually around $50; Payroll processing fees which vary but expect at least $45 per month.
S Corporation Overview
Your company must have no more than 100 shareholders and one class of stock. S corps don’t pay corporate taxes. Instead, shareholders report income on personal tax returns. Shareholders don’t pay self-employment tax on profits.
Taxation Comparison
The main difference between an S corp and a C corp is taxation: C corps pay corporate tax, then shareholders pay on dividends. An S corp passes income to shareholders directly.
Additional Considerations
Consider factors like minimizing liability, avoiding double taxation if over $100,000 a year. Once approved, you’ll receive CP261. File Form 1120S with the IRS yearly and state return, if needed.
Payment Options and Asset Protection
An S-corp offers salary, distributions, or both. Choice depends on finances and contributions. An S-corp protects personal assets. While partnerships require self-employment tax, an S-corp does not.