Learn the Benefits of an LLC
There are many benefits to setting up an LLC in Arizona. LLCs not only have more tax options, but they also offer decreased liability, reduced record keeping, and sharing of profits. They are simpler to set up and maintain, with much simpler rules and regulations. There is decidedly less registration paperwork and lower-costing startup expenses.
But is an LLC the right business structure for you? Some business types come with suggested business structures. For instance, many small business lawyers recommend you create an LLC for an e-commerce business. Why? With e-commerce businesses, products fall under product liability statutes. This means that anyone involved in the sale and distribution of the product could be held liable—even if the problem lies with the manufacturer. An LLC provides you with limited liability in case you are sued by creating a separate and distinct legal entity and isolating business assets from your assets. Therefore, compensation can only be taken from the LLC’s assets, not your personal assets.
Why is an LLC a good idea for an e-commerce Business?
If there is an issue with a product, an LLC protects you. Compensation can only be taken from the LLC’s assets, not your personal assets.
Start Your LLC Now
Besides protecting you and your assets, creating an LLC provides a business owner with more options for federal tax purposes.
- For instance, if an LLC has only one owner, it’s referred to as a single-member LLC or SMLLC. Owners have the option of being taxed as a Sole Proprietorship, an S Corporation, or a C Corporation.
- If an LLC has more than one owner, it’s categorized as a multiple-member LLC. Owners have the option of being taxed as a Partnership, an S Corporation, or a C Corporation.
An advantage to having an AZ LLC with multiple members is that the members decide how to report profits and losses for tax purposes and have several options as to how they prefer to be taxed.
For federal tax purposes, if you’re the sole member of an LLC, your business is treated as a disregarded entity. This means that although you and your business are separate entities, the SMLLC’s income and expenses are reported on the owner’s personal tax return rather than an SMLLC tax return, and the IRS ignores the SMLLC’s status as a business entity. However, for purposes of employment tax and certain excise taxes, an SMLLC is still considered a separate entity. The way a sole proprietorship is taxed is the IRS’ default option for an SMLLC.
In contrast, a corporation only has two choices: S corporation or C corporation. A business operated as a sole proprietorship or a partnership also doesn’t have an option as to how it will be taxed.
But Arizona LLCs have a few disadvantages. If LLC owners do not choose to file for a tax status as a corporation, individual members pay self-employment taxes. Those taxes often are higher than corporate taxes. Also, if business owners contemplate taking the company public and selling stock, an LLC does not permit this. Despite these disadvantages, creating an LLC for your startup business is usually recommended. It is well worth it to protect your personal assets and simplify the process of starting an LLC in Arizona.
Learn the Benefits of an LLC
For most folks looking to start a business in Arizona, the best type of company to form is what's known as a Limited Liability Company (LLC).
- Run a business
- Hold assets (such as office equipment/real estate)
- Open a bank account
- Enter into contracts
Assign Member Roles
Now it’s the time to decide whether you will run this business on your own or with another member’s or organization’s assistance, how small or large you intend for your team to be, and which duties each member will have.
- Member-managed LLC - Member-managed LLC - These may consist of single or multiple members. Each member plays an active role in the management and operation of the business and has the authority to make decisions to bind the LLC. This is ideal if the business is small, has limited resources, and all members have management skills.
- Manager-managed LLC - These may consist of single or multiple members, but members must relinquish the authority to the manager and cannot interfere with the manager's operational decisions. This is ideal if your business is too large or complex to efficiently allow the sharing of management duties among all members, or if some of your members do not have management skills.
If you know your LLC will have employees, you also know that you will have to pay them. Plus, you will need to figure out the amount you should deduct from their wages for tax purposes. Employees will need to fill out a W-4 Form, and you will need to give them pay stubs with their tax information. Before this all gets overwhelming, keep in mind that we offer Payroll, Tax and HR compliance solutions with our partner, ADP. We make it easy to pay your employees, track time, and file taxes effortlessly. Plus, you and your employees can view and update payroll information via an app--accessible anywhere, anytime, backed by 24/7 live customer service support.
Assign Member Roles
Now it’s the time to decide whether you will run this business on your own or with another member’s or organization’s assistance, how small or large you intend for your team to be, and which duties each member will have.
Decide on a Statutory Agent
Another step necessary to register an LLC in Arizona is having a Statutory Agent on file. In most states, the “Statutory Agent” is called a “Registered Agent.” In Arizona, “Statutory Agent” is the official term that the state of uses. A Statutory Agent can be either an individual who is a resident of Arizona or a business entity that is authorized to conduct business in the state (but not your own business). This can be you or someone else within your company, but keep in mind that this person will be through whom the state has contact with your business. This agent will receive legal documents (known as “Service of Process”) that pertain to your business. You are legally required to have one.
- Possess a physical street address located in Arizona (no P.O. Box address).
- Be available during regular business hours, typically Monday through Friday, 9 am to 5 pm.
Although the most comfortable option for a Statutory Agent would be to name yourself, a friend, or a family member, know that this information will be public record. Not only will the information be searchable on the state’s LLC website, it can also be republished on other sites as well. If you work from home and would much rather keep your home address private, this might not be the best choice. Additionally, you or the friend/family member has to be at that address during those hours. If it doesn’t work out and you have to change your agent, you’ll have to file a new form and pay a fee. An alternative you can look into is hiring a professional agent. We offer a Statutory Agent service for a small charge that you can include as an add-on to your shopping cart.
Decide on a Statutory Agent
Another step necessary to register an LLC in Arizona is having a Statutory Agent on file. In most states, the “Statutory Agent” is called a “Registered Agent.”
Submit Your Articles
of Organization
As you get ready to file your LLC in Arizona, you will need to fill out a form called the Articles of Organization. Unlike businesses in many other states, the Arizona Secretary of State does not process corporations or LLCs for the state of Arizona. Anyone needing to file their Articles of Organization as a corporation or LLC will need to contact an entirely separate agency called the Arizona Corporation Commission. All LLCs are required to fill out and submit the Articles of Organization with the Arizona Corp Comm. With this form, you will also need to file a cover sheet, member/manager-structure attachment (whether your LLC will be member-managed or manager-managed), and Statutory Agent Acceptance form.
Within 60 days after the Commission has approved your LLC’s Articles of Organization, a letter will be sent to the Statutory Agent containing instructions regarding the publication of the notice of LLC formation. Arizona law states that you must publish the Articles of Organization in a newspaper of general circulation in the Arizona county where you plan to do business--for three consecutive publications. A list of acceptable newspapers per county where this publication can go out is posted on the Arizona Corporation Commission website. This is a requirement for all LLCs, with an exception granted to only a few counties, so find out whether your county is one of the few. The LLC may be forced to liquidate if it fails to publish this information in a timely manner.
If filing on your own, there are usually non-refundable fees that you have to pay with check or money order, additional fees for hand-delivery of forms, and long wait times whether in person or by mail--especially if you’re filing for an LLC during peak season. GovDocFiling can speed up the process for you. We offer an easy online application, expedited pricing, and a free business start-up guide and resources with all filings. You can apply here today.
Once your completed Arizona Articles of Organization are accepted, congratulations! Your company now exists as a recognized legal entity that is authorized to conduct business within the State of Arizona.
Submit Your Articles of Organization
As you get ready to file your LLC in Arizona, you will need to fill out a form called the Articles of Organization.
Obtain an Employer
Identification Number
Next, your LLC will need to file with the IRS for an Employer Identification Number (EIN). This is a nine-digit number assigned to businesses for tax filing and reporting purposes that allows the IRS to identify the taxpayer. (Note: you do not need an SSN to apply for an EIN, so international applicants are welcome.) Corporations, partnerships, and LLCs require an EIN, while sole proprietors do not. Instead, sole proprietors can use their Social Security Number, but that is not recommended as that exposes you to potential identity theft/fraud. In any case, it is a good idea to obtain one in case the company grows or for banking purposes.
Fortunately, you do not have to waste time dealing with the IRS on your own. Going through the IRS directly to get your EIN can be complicated, confusing, and frustrating. GovDocFiling alleviates the angst and aggravation of filing government documents, including applying for an EIN, or Tax ID number. Plus, GovDocFiling has one low price for same-day processing and delivery of your EIN (other Tax ID filing services charge more than $300 for same-day service!). Easily apply for your EIN/Tax ID online here. In addition, if you have any questions about obtaining an EIN, we offer 24/7 email and phone support to help you through the process. Emails are answered quickly at info@govdocfiling.com.
Once you designate how you prefer to be taxed, that decision must remain in effect for five years before being changed without approval from the IRS.
Obtain an Employer Identification Number
Next, your LLC will need to file with the IRS for an Employer Identification Number (EIN). This is a nine-digit number assigned to businesses for tax filing and reporting purposes that allows the IRS to identify the taxpayer.
Fill Out an Operating
Agreement
Once you’ve decided on member roles within your LLC, it is time to create a business contract that holds members to their assigned responsibilities. An LLC Operating Agreement in Arizona is a legal document that determines the financial and working relationships among business owners, members, and managers. Member duties would be explained and “what if” scenarios would be covered (such as what happens if a member leaves the LLC).
If you do not have an Operating Agreement set up for your business, when something unforeseeable happens, it will be up to the state to decide how to proceed justly, and this may not be what you want. The State of Arizona recognizes Operating Agreements as governing documents, assigning the roles of each member, who manages the LLC, how members are admitted/removed, dissolution of the LLC, and more.
While an Operating Agreement is not always one of the legally required Arizona LLC forms, it is still extremely important to have one in order to protect your business. You can have a lawyer look over your Arizona Operating Agreement prior to submitting it. Get the legal advice you need to protect yourself with our partner Rocket Lawyer. Your company is responsible for maintaining copies of the Operating Agreement.
Fill Out an Operating Agreement
Once you’ve decided on member roles within your LLC, it is time to create a business contract that holds members to their assigned responsibilities. An LLC Operating Agreement in Arizona is a legal document that determines the financial and working relationships among business owners, members, and managers.
Familiarize Yourself with the
State’s Taxes and Licenses
Arizona LLC owners pay self-employment tax on business profits. On top of that, business owners also pay AZ state tax and federal income tax on any profits (minus allowances or deductions). Employers pay payroll tax on any salaries they pay to employees, and employees pay federal, state, and payroll tax on their earnings.
Instead of a sales tax, Arizona has a tax called Transaction Privilege Tax (TPT). A TPT is different from sales tax. Instead of taxing the buyer, the state taxes the seller on income from retail sales. Fortunately, it is legal to pass this tax on to the customer, so most businesses end up treating the TPT like a sales tax and have the customer pay it during a transaction. Arizona's tax rates vary primarily depending on personal net income (and county, so look up the specific details for your county).
You will also need to pay additional taxes, such as unemployment tax and workers’ compensation tax. Unemployment insurance tax helps unemployed individuals, and you can learn about it on the Arizona Department of Economic Security website. More information on worker’s comp is available on the Industrial Commission of Arizona’s website.
Plus, find out from your city or county if there are any permits you might need to obtain before you begin operating your business. In Arizona, most licenses and permits fall into one of the following categories:
- State and City Transaction Privilege Tax Licenses
- Regulatory or Professional and Special Licensing and Permits
- Local Business/Occupational Licenses and Permits
There may be extra fees for certain AZ LLC insurances, permits, and licenses. Visit the Arizona Commerce Authority website to view a variety of permits and licenses that you may need.
To keep your business running smoothly, make sure that your company is in compliance with all the current AZ business regulations, like the Arizona new hire reporting requirements. There may be changes to what’s required, so stay up to date by checking state websites regularly. Find out the requirements for LLCs in the state you plan to run your business in. Keep in mind that different cities or counties may require certain permits and licenses that other regions do not. Contact your city or county to see if there are any insurances, permits, or licenses you might need to obtain before you begin operating your business.
Familiarize Yourself with the State’s Taxes and Licenses
Arizona LLC owners pay self-employment tax on business profits. On top of that, business owners also pay AZ state tax and federal income tax on any profits (minus allowances or deductions).
Keep Track of Your
Business Financials
A bonus for applications in Arizona--no annual report of business expenses, etc. is necessary for your LLC as it is not one of the Arizona LLC filing requirements to file an Annual Report. Still, it would greatly benefit you, as a business owner, to decipher all gross receipts, dividends, interest, losses, etc. and keep track of all Arizona LLC fees. You most likely will be busy running your business, in which case, you should seek the help of an accountant to ensure that it is filled out properly. Our partner, Bench, will provide you with a team of accountants to help you with your franchise tax reports, as well as general bookkeeping services with monthly financial statements and intuitive software to monitor your business profits and expenses.
Keep Track of Your Business Financials
A bonus for applications in Arizona--no annual report of business expenses, etc. is necessary for your LLC as it is not one of the Arizona LLC filing requirements to file an Annual Report.
Raise Funds for Your LLC
You can’t start a business with zero capital. There are legal fees, document filing fees, taxes, employees to pay if you are not an SMLLC, as well as the costs of operating a business. Some of the most commonly-used options for obtaining funding for your LLC are:
- Personal savings and assets
- Informal loans from family and friends
- Peer-to-peer lending sites or crowdfunding
- Conventional bank loan
- Short-term credit card loans
- Government-sponsored grants/loan programs
- Adding LLC owners
Many new LLC owners begin with their savings to fund their new business venture. If your savings are not enough, you may need to look into liquidating your personal assets or use them as collateral for loans. Can you sell your property or refinance your home? Do you have a retirement account such as a Traditional or Roth IRA? Usually, you can withdraw contributions you made to your IRA anytime, tax- and penalty-free, but that is not always the case. Find out what kind of fees your particular retirement plan will hit you with before using your IRA to fund your business.
Next, look into whether you know someone who shares your passion for your business and has the ability to contribute financially to your dream. These personal connections may want to support your startup idea. Although accepting an informal loan from a close friend or relative may feel safe, you should still protect yourself in case your relationship with the friend or family member goes sour. Have an official contract drawn up that all parties agree to. You can choose to have it notarized and have witnesses present for extra protection.
If you prefer not to borrow from friends and family, you can turn to a peer-to-peer (P2P) or social lending website. A P2P site is a place where investors seek out alternative opportunities to invest outside of stocks and bonds. You can apply for a loan and investors can decide whether or not they wish to fund your proposed business through interest-based loans. You can also look into crowdfunding, which is a way for small businesses or startups to raise money online through donations. These options typically require the ability to promote your business well, ensure complete transparency of where the funds go, and sometimes, the possibility of giving up ownership of a piece of your business. Make sure you look into all of the specifics.
You might be hoping to rely on a conventional loan from a bank, credit union or other lending institution for your main source of funds. In this case, you would need a formal business plan to present during your loan application process. If approved, you would be required to sign a legal contract, or a Promissory Note, outlining your obligations to the lender (which would primarily entail regular payments until the loan is paid off). If you are a first-time business owner, it is likely that you may be rejected initially. In that case, you can improve your application and reapply, or look into alternative sources of funding such as short-term financing via credit cards.
Using a credit card as a means of obtaining a fast and easy business loan would grant you use of immediate funds without the hassle and paperwork of loan applications or business plans. This is the best option for a brand new business, and we work with Nav to give our customers access to the credit they need. Visit our financing page and fill out the form for more information.
There are many credit cards that have low or no annual fees, low introductory interest rates, and other rewards depending on your spending. But be careful: make sure you pay back your credit card before the promotional low interest rate expires and skyrockets, or prior to having to pay large annual fees. And don’t make large purchases that can take years to pay back. For example, getting an equipment loan to purchase a piece of equipment is smarter than putting it on a credit card. Credit cards can be a good temporary solution if your business plan will allow you to pay back the debt quickly.
Another option at your disposal is a government-sponsored grant or loan program. Traditional lenders can turn to federal, state, or local governments to finance their business if such a grant or program is available. Typically, these programs consider sponsoring specific type of businesses or certain business owners, so be sure to research what government-sponsored loan your particular business or you might be eligible for.
Lastly, you can invite new members to your team. If you could see your businesses strategy succeeding with a partner or multiple partners, pool together your financial resources with another member to support your startup. An advantage to this funding option is your partner(s) may come with their own social network of business contacts and possibly even their own potential investors. To protect yourself, you can adjust your Operating Agreement and ensure that you are still the primary owner of the LLC.
Raise Funds for Your LLC
You can’t start a business with zero capital. There are legal fees, the Arizona LLC filing fee, taxes, employees to pay if you are not an SMLLC, as well as the general Arizona LLC cost of operating a business.
Create a Business Website
Creating a website for your business is not a requirement but it is recommended to any business owner operating in the modern world. An online presence is important to have and maintain in order to ensure that your customers trust your company and know they will receive good customer service. Having a website gives your business legitimacy; your customers will visit your website and see that you are a real company with an actual website where they can read about the company’s origin and products/services and access contact information. Being able to read up on a company on their website leads to trust between a consumer and an organization. Also, dependable customer service is often offered through a website. By offering an email address, a contact form, and/or live chat with a representative on your website, you are making it easy for a customer to get connected with someone knowledgeable about the product/service. That allows a customer to know that there is a real person who cares about their satisfaction within the company that they are doing business with.
Start LLC formationIf the website is outdated or there is no website, a consumer may feel that you are not a legitimate business but a scam with no licenses to back up your business’ operations. You can avoid losing customers due to not having a professional website by ensuring that you have one. We work with GoNorth Websites to provide new businesses with high quality, cost-effective websites. Find out more about our custom designed, written, and developed websites, plus optional internet marketing add-ons that help you grow your business.
But websites needs maintenance too. You can’t simply have one created and never update it throughout the years. Policies and terms change, companies grow, products/services improve, and all of that (and more) can be reflected on the website. This keeps your customers up-to-date and offers a personal touch that is valued by any consumer.
In addition, you can look into having a blog or utilizing social media as another means of keeping your customers in-the-know and offering them a way to interact with your company. An online and/or social media presence can also lead to responsive customers who can offer you feedback on how you’re doing—plus, it’ll help get your company’s name out there.
If this all sounds like more than you’d like to deal with on your own, know that you can hire someone to maintain your website and social media presence for you—just like you can hire customer representatives to handle all correspondence. You can employ a web agency to monitor your website and/or a social media marketing agency to manage your social media campaign. A social media campaign is a coordinated marketing plan that can assist you with your business goals, which translates into extra advertising for your new business. Marketing your company can help you have a more profitable business and can aid you with paying back your business loans quicker—something any business owner aims for. Regardless of industry, all businesses should consider having a website as part of the first steps of starting a business.
T The Benefits of Having an Online Presence
If you’ve decided that you want to have a website for your business, keep a few things in mind. When coming up with a website name, make sure that the domain contains your business name and is easy to type and remember for future visits. If you come up with a great web domain that you’d like to use for your business but you don’t plan to create a business website today, you may want to buy the URL to prevent others from acquiring it.
While brainstorming website URLs for your website, you’re going to either realize that you already know what your business is going to be named or that you have no idea what or how to name your business. Here are a few quick Arizona business name tips:
- Follow LLC naming guidelines. Make sure that the name of your business ends with the phrase “Limited Liability Company” or the abbreviation “LLC.” It’s also important not to use any words or phrases that will make it easy for someone to mistake your company for a federal agency; think “State Department.”
- Find a unique name. If you’re creating an LLC in the State of Arizona, you will need an original name that is not in use by another LLC. To check if a name has already been taken, you can search the name database here.
- Make sure it is available as a web domain. This way, you can find out if another company outside of Arizona has a business with the same name. In that case, think of something more original.
Create a Business Website
Creating a website for your business is not a requirement but it is recommended to any business owner operating in the modern world.
Begin Operating Your Business
One more detail and you’re done: As you get that Grand Opening sign ready, make sure you find a suitable newspaper to publish in. This is not a recommendation, it is actually Arizona law that, within 60 days of your LLC’s approval, you are required to notify the public of your LLC’s formation by publishing an ad in one newspaper for 3 consecutive publications. The newspaper must be located in the same county as your LLC. There are few counties that are granted an exception, so look into whether your business will be operating from one of those.
Now that you’ve brushed up on your AZ LLC info and have officially become an LLC, make sure you keep your LLC compliant. Remember to keep track of all important dates and keep up with all necessary payments. If you’d rather not do these tasks yourself, you can sign up for a service that will automatically send you alerts ahead of crucial state and federal filing deadlines. Likewise, you can hire an accountant, a tax professional, and/or an attorney to ensure you are not making errors when keeping records, filling out paperwork, and making payments.
Begin operating your Arizona Limited Liability Company with peace of mind, knowing that you are protected by the benefits of an LLC in case anything unforeseeable affects your new business venture.
Begin Operating Your Business
One more detail and you’re done: As you get that Grand Opening sign ready, make sure you find a suitable newspaper to publish in.
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Client Feedback
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Frequently Asked Questions
Questions? Look here
A federal Tax ID Number is an identification number used by the Internal Revenue Service (IRS) to administer tax laws. This number is issued either by the IRS or Social Security Administration (SSA). A business Tax ID number is required on tax return forms.
An Employer Identification Number is a nine-digit number that identifies your business. It works much the same way your social security number does. If your company has employees, is a corporation or partnership, has a Keogh Plan or fits one of several other situations, it must have its own EIN.
As a business owner, you probably know your company needs an EIN (or Tax ID Number) issued by the IRS for tax purposes. But what if you own multiple businesses or operate different divisions of the same entity?
Your business is going to need to file income taxes. The Internal Revenue Service uses Tax Identification Numbers to distinguish between individuals, business, and nonprofit organizations, but business tax ID numbers should be distinct from your personal federal tax ID number.
For the IRS to conduct its business, it must have an easy way to identify each individual and business. To do this, they require each individual and business to have a tax ID number.
A social security number (SSN) is a tax code used by an individual, while a tax ID is a nine-digit tax code for a business entity. For a business entity, a tax ID is usually called an EIN.
If you’ve ever considered working for yourself, or starting your own business, you may have wondered: what is a DBA? Is a fictitious business name the same as a DBA? What are the benefits of a DBA to my business and myself?
Each type of business entity has clear advantages and disadvantages. Can a DBA be filed for all business types? In most cases, yes; but understanding what a DBA is and what it’s limitations are will help you decide if it’s worth
DBA application filing is a process overseen by state DBA laws and local government, protecting the public from nefarious business owners. DBA is an abbreviation for “doing business as,” and is also referred to as a fictitious name or trade name.
If you’ve ever considered freelancing, or starting your own business, you should take a few moments to answer this very important question: Do I need a DBA? Not every small business owner needs to pursue DBA application filing, but
DBA is an acronym that stands for “doing business as.” You may be wondering “do I need a DBA?” If you intend to do business using a name other than your legal business name, you need a DBA. DBAs are common for sole proprietors or partnerships that do not want to use the owners’ legal names to do business.
If you’re starting a business, there are more then a few abbreviations you’ll need to remember. Filing a DBA application, or applying for an EIN, are two common steps for new business owners. However, they are not the same thing, and as a business owner you should know the difference.
A limited liability company, commonly referred to as an LLC, combines the taxation benefits of a partnership with the limited liability of a corporation. Instead of partners, LLC business owners are called members, and there can be several, or a single member.
A limited liability corporation is one in which the members aren’t personally responsible for any company liabilities or debt. Limited liabilities have the protections of a corporation but the flexibility of a partnership. If your business is listed as a limited liability corporation, you can benefit further by applying for an Employer Identification Number.
The fine print that separates a limited liability company (LLC) from a corporation can be overwhelming for new business owners or entrepreneurs. While the minutia of these details might be best suited for a legal advisor or accountant, the broad differences are fairly easy to understand, and they might be enough to help you make a judgment
Limited Liability Companies (LLC) are popular business structures because they offer personal liability protection for members and don’t have all the formalities that corporations do. LLCs also enjoy pass-through taxation, which means the company doesn’t pay federal income taxes; instead,
For entrepreneurs thinking about starting their own business, forming an LLC is an ideal option, as such an entity provides the owners protection from lawsuits, business debts and other business indiscretions. However, in order to obtain that protection, there are a number of documents that the business owner or owners must file with the state government prior to conducting business.
A Limited Liability Company is a legal entity all its own, while a partnership is owned by two or more people who share legal responsibility of the business entity. In a partnership, the business does not possess a legal identity outside of the business owners. A Limited Liability Company offers more flexibility in terms of operations and personal asset protection.
A C-Corporation is just anther way of saying corporation. It means the same thing. Corporations are incorporated business entities that file Articles of Incorporation with the Secretary of State or a similar government agency.
There are certain C-Corp requirements to meet whether you want to start a corporation with one shareholder or dozens. It is certainly possible to apply for a C-Corporation EIN with multiple owners, and when forming a C-Corp in this manner, there are a few points to keep in mind.
Unlike other business structures, C-Corp taxation is significant in that corporations are taxable entities. Corporations are taxed like an individual and contribute according to corporate income, and then again on shareholder tax returns. This is commonly called ‘double taxation’.
S-Corporations, sometimes called S-Corps, can be useful ways for business owners to avoid what’s called “double taxation”, while also protecting shareholder assets from personal liability. It’s a mix of advantages drawn from other types of business entities; and it isn’t nearly as complicated or time consuming as you might think to establish.
Before we dive into how to file to become an S-corporation, let’s take a look at what an S-corporation is, exactly, and why you may want to establish this type of business entity for your company. S-corporations are similar to partnerships, or sole proprietorships, at least in terms of how the company will affect you financially.
There’s No Such Thing as a Disqualified S Corporation. Luckily, S corporation disqualification is more of an urban legend than fact. In 2010, Congress attempted to pass a measure that would have disqualified some S corporations, primarily small businesses, from using S corp tax structures when filing.