The Process of Starting an S Corp
If you are thinking of starting an S corp in California, you better get all the information in one place. You need to understand why you should incorporate and where you should go to incorporate your business. Only by fully comprehending what you stand to gain from the process of incorporating as an S corp will you be able to decide on your best course of action. So, let’s get straight into it. Read on!
What are the advantages of starting an S corp?
First, let’s go over the advantages of a corporation in general:
- protection of personal assets on account of limited personal liability;
- availability across the country (despite the state where it was registered)
- perpetual existence of the company (even after its original founders leave or pass away)
- protection of the company’s name (the name is no longer available for others to use)
- the business becomes legitimized
- the possibility of issuing stock options to employees
- the possibility of transferring shares to other owners or investors
- the possibility of investment capital increase
- deductibility of certain expenses
- tax flexibility
The upside of an S corp itself and the main reason why many business owners decide to incorporate their company as an S corp is that paying the self-employment tax is not a requirement. Businesses dealing in services or consultancy are considered best suited for this type of corporation, for the following reasons:
- Low start-up costs
- Modest investment of resources, including money
- Minimum initial purchases in terms of supplies, equipment etc.
- Favorable financial outlook
How do I start an S Corp?
It is a step-by-step process that boils down to the following:
- Registering your business name and DBA or Doing Business As name (optional) with the Secretary of State
- Filing Articles of Incorporation
- Hold the initial meeting of the organization and adopt the company bylaws
- Applying for an EIN (Employer Identification Number) with the IRS
- Checking for applicable license or permit requirements and submitting the required paperwork in order to obtain them
- Submitting your initial report (called Statement of Information) within a 90-day deadline
What are the requirements for an S corporation?
You need to file Articles of Incorporation (also referred to as Certificate of Incorporation) with the state and pay the applicable filing fees. The next step is to file form 2553 with the IRS. At that point, you choose S corp as the status of your corporation. The final step in the process concerns the legal requirements for S corps, such as:
- Adopting bylaws
- Holding the initial meeting of the Board of Directors
- Holding the initial meeting of shareholders
- Issuing shares to stockholders
How long does it take to form an S Corp in California?
On average, the process should take 4 to 6 weeks to complete. For this reason, most business owners who decide to incorporate decide to hire professionals to help them so they can be certain that the process goes faster and as smoothly and efficiently as possible.
The fastest road to starting an S Corp in California State
Starting a corporation may seem like a long and winding road. To those new to the world of business, it may even sound intimidating, much like the Mount Woodson via Lake Poway hiking trail. But when you rely on David York’s Tax Service for assistance and support, you are relying on professionals who will make sure that everything goes without a hitch from start to finish. We take nothing for granted and we take every step with great care and your best interest in mind. Call us today and let’s get started.