To form an S corporation in Michigan, you need to:
- File Articles of Incorporation and pay a $60 online filing fee
- File a Statement of Information (Form SI-550) within 90 days and pay a $25 filing fee
- File IRS Form 2553 to elect S corporation status
- Open a corporate bank account
S corporations must file an annual return by the last day of the fourth month after the tax year ends.
To maintain S corp status, corporations must file an Annual Report each year with the MI Department of Licensing and Regulatory Affairs.
An S corp is required to file Form 1120S, the annual tax return for the business, to report deductions, gains, income, and losses. Schedule L may be required if the S corp does not meet certain requirements.
An S corporation provides limited liability and allows income, deductions, and credits to pass to shareholders. There are limitations such as a 100-shareholder limit and domestic business requirement. Profits are not double taxed as in C corporations, but S corporations can incur higher costs due to separate tax filing requirements.
To elect S corp status, a corporation must first be formed as a C corp. Then, the owners must sign and file Form 2553 within 75 days for S corp status election. The IRS will accept or deny the election.
If elected, the S corp files Form 1120S instead of Form 1120. This form calculates income or loss and then allocates it to shareholders to report. As an informational return, no income tax is paid at the corporate level.
Shareholders report S corp income on Form 1040 personal returns. Schedule K-1 is used to inform shareholders of the amounts to report.