How to Set Up a S-Corporation

Setting an S-Corporation for your business sounds like an easy thing to do. After all, in most states you can just go online and file it in a matter of minutes. The filing fee is usually minimal depending on the state. Some states even have a website with a "one stop shop" where you not only get your S-Corp filed, but you also get a Federal ID number, a state withholding number, a state sales tax number and an unemployment account. What more could you possibly want?

The problem is that there is more to setting up a S-Corp than the website will tell you. Here is a list of steps you need to take in order to set up a S-Corp. I encourage you to read through this list then go to someone with experience to make sure it is done correctly. Here are the steps:

1. The first and sometimes the most difficult step is choosing a name. The name of your S-Corp cannot be the same as any other in the state. Every state has a search that you can perform to see if the name is available.

2. Once you have a name, Articles of Incorporation must be filed with the state. Some states have a Division of Corporations and others just use the Secretary of State website. Many states have a fill in the blank form for the Articles of Incorporation. This is usually very simple and self-explanatory. If your state doesn't provide a form you will have to write your own making sure that all the necessary information is included that your state requires. There is a fee and it will usually take 2 to 3 weeks to get final approval.

3. Once your Articles of Incorporation are approved, the next step is to obtain a Federal Employer ID Number or EIN. This can be done on the IRS website. Every entity must have an EIN. It is the Social Security number for a business.

4. Once you have an EIN you must fill out and mail an IRS form 2553 to obtain your S-Corp status.

5. The next step is to create Bylaws. These are the rules that your S-Corp will follow. This is the document that provides liability protection for your company. You will also need to hold two initial organizational meetings.

6. There are some other accounts you may or may not need for your company. If you will pay employees you will need to set up a state withholding account and an account with your state's Unemployment department. Also, if you will be selling something that requires you to collect sales tax, you will also need to set up a Sales Tax account with your state. Warning: Only set up these accounts if you need them otherwise it will cost you time and money.

7. Set up a bank account for the company. It is important to separate your personal accounts and bills from your company accounts and bills. Co-mingling can cause the government and others to not consider your business a valid business and it can destroy the liability protection.

My suggestion to you is go to your accountant or find an attorney to help you set up your S-Corp. By knowing the above information you will know if the person is doing all he or she is supposed to and it will help you to know what kinds of questions to ask.

For more information on S-Corps and other business tips, go to http://www.avoidbeingaudited.com.