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Avoiding double taxation, liability protection and writing off start-up losses are some advantages of forming an S-corp. You may have considered it in the past, but think it’s too much work. Yet, the advantages outweigh the complexity of navigating this process.
You might think an attorney is the only person who can register your business, but that’s far from the truth. You can do it on your own if you learn how to form an S-corp. Don’t know where to start?
We’ve got you covered. We’ll tell you everything you need to know about this taxing status and how to obtain it. Keep reading for your guide to registering your business as an S-corp today.
What Is an S-Corp?
An s-corp is a taxing status given by the Internal Revenue Service (IRS). This classification allows businesses to be taxed as a partnership. This status allows business owners to lower their tax bills.
Under this classification, shareholders will share business income or losses reporting them on their personal tax returns, therefore, avoiding double taxation.
Think filing for S-corp is the right call? Here are the 4 steps to filing your company for S-corp status.
1. Learn About the S-Corp Status Requirements
Not all businesses are eligible to file for an S-corp status. Before making any regulatory filings, it’s important to learn the requirements and everything you need to file for s corp. Here are some of the basic requirements to qualify for this tax classification.
- No more than 100 shareholders
- Shareholders must be US Citizens or Legal Residents
- Domestic Business Entity
- Only offers common stock to its shareholders
2. Register Your Business
To be eligible for an S-corp classification, you must register your business as a corporation or limited liability corporation (LLC). The best corporate structure for your business will depend on your industry and business model.
You should consider consulting an attorney to learn more about your options. A legal expert can explain the main differences between both structures and how to protect your business.
3. Request an Employer Identification Number and File Form 2553
Once you register your business, you need to request an employer identification number (EIN) with the IRS. An EIN is the business equivalent of your social security number. You’ll provide this number to conduct business operations from opening your company checking account to importing goods.
After you obtain your EIN, you should file Form 2553 with the IRS. When you file the form, you’ll inform this agency of your election to be taxed as an S-corp. If you’re unsure how to file or complete this form, you should consult an accounting professional.
4. Obtain Any Required Licenses and Permits to Operate Your Business
If your business isn’t operating already, you should apply and obtain any licenses and permits needed to conduct business. Depending on your business model, you may need to contact several local agencies for guidance.
So You Learned How to Form an S-Corp, Now What?
Learning how to form an S-corp can help you lower your yearly tax bill. However, you should consider the advantages and disadvantages of this tax classification.
Consider consulting an attorney and accounting professional for insight into your options. These experts can tell you if filing for S-corp is the best call.
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