How to Form a Sub S Corporation
Sub S corporations, also known as S corporations, are a special type of business entity that allows shareholders of the company to pass their share of profits to their personal tax return. S corporations are formed in the same manner as any other regular corporation. However, S corporations may have no more than 100 shareholders, all of whom must be U.S. citizens or resident aliens. Furthermore, S corporations may not have partnerships, limited liability companies, or corporations participating as shareholders of the business.
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Instructions
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Select a name for the S corporation. Most states require the business name of an S corporation to be distinguishable from business names that are registered, or held on reserve in the state. In other words, the proposed name of your S corporation can't be too similar to a business name that's already registered by another business entity in the state. Conduct a business name availability search with the Department or Secretary of State where the S corporation will organize. Most states will allow an S corporation to check the availability of business names using the Department or Secretary of State website. Depending on the state, a representative of the S corporation may need to call the Secretary or Department of State's office in order to confirm business name availability.
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Choose individuals to serve on the S corporation's board of directors. Depending on the state of incorporation, you may be required to select at least three individuals to serve on your S corporation's board of directors. The exception to this rule occurs if you have fewer than three shareholders participating in the S corporation. In this event, the number of directors in the S corporation must be the same as the number of shareholders in the S corporation. Most states require at least one person to act as the company's director.
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Acquire articles of incorporation. Most states have fill-in-the-blank articles of incorporation that may be printed from the Department or Secretary of State's website. In other instances, a representative of an S corporation may pick up articles of incorporation in person at the Department or Secretary of State's office where the S corporation will organize. A representative of an S corporation may call the Secretary or Department of State to request articles of incorporation by mail.
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Complete the S corporation's articles of incorporation. S corporations will be required to supply the legal name and principal address of the company. State the number of shares the S corporation has the authority to issue. Some states may require an S corporation to list initial directors' names and addresses in the company's articles of incorporation. Provide the name and address of the S corporation's registered agent. Most states require an S corporation's registered agent to be an adult, or registered business with a physical address in the S corporation's state of incorporation. Registered agents for an S corporation have the responsibility of accepting legal documents and other business correspondence for an S corporation.
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File articles of incorporation with the Secretary or Department of State where the S corporation will organize. Most states will accept an S corporation's articles of incorporation by mail, fax or electronically. Many states allow an S corporation to submit articles of incorporation on the Secretary or Department of State website. In other instances, a representative of the S corporation may hand-deliver the articles of incorporation to the Secretary or Department of State's office. The fee for an S corporation to file articles of incorporation will vary from state to state.
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File Form 2553 with the Internal Revenue Service. An S corporation has 75 days from the date of formation to file Form 2553 with the IRS. S corporations that fail to file Form 2553 in a timely manner will be recognized as a C corporation for the remaining tax year. Download and print Form 2553 from the IRS website. Supply information such as the S corporation's date of incorporation, legal name and address of the company, as well as the nature of the S corporation's business activities. Form 2553 must be signed by all S corporation shareholders.
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