Form an S-Corporation the Right Way—For Free!

Here are the steps you need to follow to form an S-corporation:

• Choose a Legal Name: Pick a unique, relevant, and memorable name before you form an S-corporation. You’ll need this while filing your Articles of Incorporation or Certificate of Formation.
• Select a State: While most people choose their home states to form an S-corporation, you could consider other states. Pick states with low taxes and business-friendly policies to form an S-corporation.
• Pick a Registered Agent: Hire a registered agent to receive legal notices and correspondence on behalf of your business, forward them to you on time, and notify you of upcoming compliance deadlines.
• File the Articles of Incorporation: To form an S-corporation, you first need to form a C-corporation and then opt for the S-corp status. This step allows you to incorporate your business and form a domestic corporation.
• File S-Corp Election Form: File the federal Form 2553 to opt for the special tax status of an S-corporation. This is the most important step in the process of how to form an S-corporation, so you can’t skip it.
• Draft Corporate Bylaws: Create a detailed document outlining the guidelines for managing your new S-corporations. The board of directors should meet and draft the corporate bylaws during the initial meeting.
• Issue Stock: When you form an S-corporation, you need to issue common stock and distribute ownership certificates or stock certificates to shareholders. You can only issue one type of stock to form an S-corporation.
• Appoint Directors: Once you form an S-corporation, you need to appoint a board of directors. There could be one or more directors. You should also appoint officers and managers to run your new business.
• Apply for an EIN: After you form an S-corporation, you need to apply for an employer identification number (EIN) or Tax ID. This is important if you plan to hire employees and for numerous other business purposes.
• Get Licenses and Permits: You can’t start running your business, even if you form an S-corporation until you get the required business licenses and permits. Find the requirements and acquire the necessary licenses.
• Open a Business Bank Account: Every business should have a bank account to track and manage its finances. After you form an S-corporation, you should open a business bank account as soon as you can.
• Get Your Business Insured: Another thing you should do once you form an S-corporation is to protect your business by getting insurance. Start with the necessary covers and add more as your business grows.
• Apply for a DBA: A Doing Business As allows you to run your business under an assumed name or fictitious name. So, if you want a shorter name for branding your business, after you form an S-corporation, file for a DBA.
• Comply with Regulations: Lastly, your job is not done after you form an S-corporation and complete the above steps. You need to meet ongoing compliance requirements and stay in good standing with the state.

If you form an S-corporation without any external help, you just need to pay the state filing fee, which could be anything from $40 to $300, depending on the state. This is just the registration fee, you will, of course, have several other startup costs to start a new business.

The problem with registering a business yourself is that it can be a tedious process and you may end up making some mistakes. This could get your application to form an S-corporation rejected.

That’s why many entrepreneurs prefer hiring a professional to do the paperwork for forming an S-corporation. This could cost a few hundred dollars, depending on the agency you choose to form an S-corporation.

Inc Authority, however, charges nothing to help you form an S-corporation. It offers plenty of free services along with it, to make the process of starting a new business easier for you.

If you opt for Inc Authority to form an S-corporation, you just need to pay the state fee and still get professional help with the paperwork.

The main reason business owners opt for the S-corp tax status is to save money on taxes and maximize tax benefits. Here are some of the key benefits you can realize if you form an S-corporation.

• Pass-Through Taxation: This is the key reason why people form an S-corporation over a C-corporation. It allows profits and losses to pass to owners, who then pay personal income tax on their earnings. This avoids the double taxation as S-corps don’t pay corporate income tax.
• Liability Protection: Similar to LLCs or corporations, S-corporations also provide liability protection to their shareholders. If the business incurs debt or faces a lawsuit, the shareholders can’t be held liable. Their personal assets and income are protected and can’t be seized to recover business debts.
• No Self-Employment Taxes: S-corporations and LLCs both have pass-through taxation, but one advantage of S-corporations is that the owners don’t need to pay self-employment taxes on profit distributions. This is just one of the many ways in which you can save money if you form an S-corporation.
• Easy Ownership Transfer: When you form an S-corporation, shares can be sold or transferred without disrupting the business operations, as long as the new owner meets the S-corporation criteria. This makes succession planning and ownership transfer quite easy, compared to LLCs or sole proprietorships.
• Credibility and Trust: When you form an S-corporation, you register a legal business entity, which has legal rights and responsibilities. This gives your small business credibility and trust, whether dealing with investors, vendors, or financial institutions like banks. This makes it easier to get business funding.
• Other Legal Rights: As mentioned above, when you form an S-corporation, it is a separate legal entity with certain rights and privileges. It can enter into business contracts or buy business assets in its own name, without help from shareholders. This adds another layer of liability protection for shareholders.

Both business structures have their unique advantages and disadvantages. Most small businesses form an S-corporation to avoid double taxation. However, it’s only a small cost in the large scheme of things when you run a large business and want more funding and stock options.

If you’re a small business or startup looking for simplicity, lower tax rates, and don't need outside investment, an S-Corp is a better option.

If you're planning to scale up significantly, raise venture capital, or eventually go public, a C-Corp might make more sense because of its ownership flexibility and capital-raising options.

Basically, a small business would benefit from an S-corp but C-corps have more benefits for a large business that plans on expanding and raising a lot of capital.

There are numerous service providers who can help you form an S-corporation for a cost, but Inc Authority does it for free. You get free incorporation, EIN filing, and S-corp election services, among many others.

This allows you to get professional help, without paying a dime. If you want to form an S-corporation correctly, with professional help, but don’t have the budget to pay a professional, choose Inc Authority over other service providers.

The best part is that it not only helps you form an S-corporation but offers numerous free services. You can form an LLC or corporation for free, apply for an EIN, and get free registered agent services for one year. Overall, it’s one of the best deals in the market, if you plan to form an S-corporation and need professional help to do that.

Inc Authority will help you form an S-corp and will provide several other essential business services for free. Try its services and get your business started quickly.