How To Form a California S corporation

By: lawinc | Posted: 19th November 2010

If you are considering incorporation, an S Corporation provides several benefits for business owners if you qualify. This page will help you understand the qualifications needed to elect S Corporation status as well as provide you with step-by-step instructions on how to form an S Corporation. A subchapter "S" Corporation is a business that chooses special tax status after it becomes incorporated. An S Corporation limits the owners' liability of business debts and allows them to save money by taking distribution payments as opposed to salary. Once your business becomes incorporated, it's simple to change to S Corporation status. There seems to be an endless list of tasks to accomplish when starting your own business. One of the most important—but sometimes challenging—decisions you will make is to determine what business structure to use. Choosing one particular structure over another will determine how your business is managed, taxed and what level of protection for personal assets you will have from business issues that may arise.

Electing "S Corporation Status" may be one option you want to consider. Form a Regular Corporation First • The first step in electing S Corporation status is to form a regular corporation. While forming a corporation varies state-to-state, the most common steps include the following:

1. Choose a Name - Choose a name that is unique. Conduct a thorough search to ensure your name is not already in use and then register it to secure it for future use.

2. Select a Location and Headquarters - Most business owners choose to incorporate in the home state of the owner—where most of the business will be done. However, if you plan on doing business in a variety of states you may also need to acquire a certificate of "foreign corporation" as well. Check with the Secretary of State or Business Services division of that state's government for requirements and filing fees.

3. Find a Trusted Advisor - While not required, many business owners prefer to choose a trusted lawyer or accountant that specializes in new businesses to help guide them through the incorporation process.

4. Identify Shareholders & Directors - Most corporations consist of a board of directors, officers and shareholders. The size of the corporation often determines how many shareholders and directors the business will have. For instance, a small organization may have only one director (who is also the only shareholder and officer). A good description of each role can be found in the article Directors to Shareholders by FindLaw.

5. Gather and Fill Out Paperwork - The first three documents you'll need are articles of incorporation, corporation by-laws and a stakeholder's agreement. These documents will be attached to the articles of incorporation that will be sent to the appropriate Secretary of State for filing and registration. 6. File Articles of Incorporation with Secretary of State - Filing the paperwork yourself may reduce costs but you might consider using an Incorporation service business like Incorporate.com or LegalZoom or your trusted advisor instead to avoid any mistakes that will affect you in the future. A lawyer can also keep up with annual updates and filings with the state as needed. 7. Obtain EIN and Certificate of Incorporation - Once the Secretary of State office has received your paperwork and processed it they will send you a Certificate of Incorporation and EIN (Employer Identification Number). Once you've mailed in your 2553 form with the appropriate information, that is all you need to do to elect S Corporation status. The IRS has pulled together a page with links to forms and instructions you may need to use when filing your taxes once you have elected S Corporation status LawInc.com is an online law firm which caters the needs of businessmen regarding legal matters concerning business ownership. The said website is a division of a professional corporation called Javdan law Group. As stated, it provides modernized practice of law at a reasonable price. In conclusion, LawInc.com presents that it pioneers the delivery o
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Tags: money, business owners, doing business, business structure, starting your own business, salary, personal assets, incorporation, business issues, secretary of state, business debts