Form an S-Corporation for your small business

If you are going to be forming an S-Corporation for your small business, the first thing that you will want to do is compare your different options to ensure that you have chosen the correct one for your business. You will want to compare the S-Corporation against the C-Corporation and the Limited Liability Company to see what benefits you can get from each type of corporation. When comparing the pros and cons of each type of corporation you will be able to clearly see which one is best for your business.

If you have determined that the S-Corporation is the best choice for your small business here are the steps that you will need to take to form an S-Corporation for your small business.

Step one:
You will need to determine if your small business is qualified to choose the S-Corporation election. Not all business can become S-Corporations, if you are in doubt you will need to talk to your lawyer or accountant to determine if you are eligible or not. You can also look at the IRS Instructions for Form 2553 to determine if your small business qualifies for S-Corporation status. This form has several tests that you can do to determine if your business is eligible for the S-Corporation status.

Here is a look at some of the requirements that you must meet:

• You must choose S-Corporation status no more than two months and 15 days after the beginning of the tax year that the corporation is electing for this status. You can also elect the S-Corporation status at any time during the tax year proceeding the tax year the election is supposed to take place.
  
• All shareholders must consent to the S-Corporation status and all of the shareholders must be a U.S. citizen or resident.
  
• The corporation can only have one class of stock and cannot have any more than 100 shareholders. The shareholders must be individuals, estates, and exempt entities, cannot be other corporations.
  

Step two:
You will have to form a regular corporation before you can form an S-Corporation or even elect to form an S-Corporation. The most common steps that you will need to follow when forming a corporation is to choose a name for your corporation based on the guidelines issued by your state. You will also need to fill out the Articles of Incorporation, which will include information on the shareholders, the trusted agent, and the location of your business. Once the decisions have been made and the paperwork has been filled out, you will need to file it and pay the appropriate filing fees with the Secretary of State. After the paperwork is filed, you will need to obtain your EIN and Certificate of Incorporation, which the Secretary of State will send to you once they have completed your request.

Step three:
Once you have formed a C-Corporation you will be able to elect S-Corporation status by doing a few more things. The first thing that you will need to do is complete the last few things necessary to form a C-Corporation, which is to sign the Certificate of Incorporation and hold your first official Board Meeting. Once that has been done you will need to obtain a copy of IRS Form 2553, Election by a Small Business Corporation, this form can be downloaded from the IRS website. Once you have downloaded the form you will need to fill out the form, make sure you include your EIN, the date of incorporation and the state of incorporation, failure to include this information will result in the denial of your application. The last thing you have to do is mail the form back into the IRS, where you mail it will depend on the state you are incorporated in.