Setting Up an S Corporation

Necessary Steps to Protect Your Enterprise

An S corporation can provide a number of benefits to a startup business:

• You can limit liability to the amount of your investment.
• You can avoid taxation at the corporate level.
• Ownership can typically be transferred more easily than with a C corporation.
• You can take advantage of the cash method of accounting.

Here are the proper steps for successfully establishing your business as an S corporation:

Step #1—Choose a name for the business: When you file articles of incorporation (which you must do for an S corporation), you must identify the name of the business. Be careful not to choose something deceptively similar to an existing business or you might find yourself in an intellectual property dispute.

Step #2—Identify the company directors—State laws and the IRS require this.

Step #3—Determine how ownership will work—With an S corporation, you are required to issue stock certificates in the form of common stock, preferred stock, or both.

Step #4—Prepare and file articles of incorporation—Articles of incorporation are filed with your state’s business regulation agency—usually the Secretary of State. It must also be filed with the IRS.

Step #5—Prepare and execute your company bylaws—Bylaws may be the most important document in the process, as they set forth how your business is structured, as well as the rights and responsibilities of directors and officers. In many states, you are required to file a copy with the Secretary of State or other business regulation agency.

Step #6—Ensure you receive a copy of your certificate of incorporation—A certificate of incorporation should be issued to you within a couple weeks of filing all required documents with your state business regulation agency.

Step #7—File Form 2553 with the Internal Revenue Service—To elect S corporation status, you must file IRS Form 2553. If you don’t, your company will be treated as a C corporation.

Step #8—Designate a registered agent in your state—You must identify a person or entity that will receive legal documents on your behalf and register that agent with the proper state agency.

Contact MCIS Law for Experienced Business Law Counsel

At MCIS Law, PLLC, in Stafford, we work closely with startup and existing businesses in southeast Texas, providing a broad range of legal services, from business formation to the negotiation, review, and drafting of business contracts. For a confidential consultation with an experienced and knowledgeable lawyer, email us or call our office at (346) 297-0121. We are currently communicating with clients by phone, text message, and videoconference. We accept all major credit cards.