Rhode Island S-Corp
Learn the Benefits of an S-Corp
When you decide to start a business, there are a number of business entities to choose from. Each has its own advantages and disadvantages, which we will introduce to you here. Prospective business owners should consult with professionals, such as a business attorney and accountants, before making the final decision. But educating yourself about the different types of corporations can help you assess what is the right business structure for you beforehand.
But first, are you ready to incorporate? It is advised that you should incorporate when you anticipate taking investments or when your business approaches material size or complexity.
Typically, “material size” means a business with revenue above $100,000. Once you know you’re ready, you have the option between choosing to classify your business as a C-Corporation or an S-Corporation. While S-Corps used to be the way to go for small businesses (it’s even been nicknamed the “Small BusinesS-Corporation”), thanks to the 2017 Tax Cuts and Jobs Act, C-Corps may now offer lower corporate tax rates to smaller business. Now, S-Corps are sometimes advisable for larger businesses. But keep in mind that C-Corps give you more options to expand and raise money, which can be very beneficial to a larger business. You may want to discuss the differences with a financial advisor or lawyer who can help break down all of the costs to help you assess what will work best for you.
Whether you choose to structure your business entity as a C or S-Corporation will determine how much you’ll pay in taxes, the ways you’re permitted to raise money, and the ease with which you can expand as your business grows. The standard and most common type of corporation is a C-Corporation. In fact, a C-Corp is the default type of corporation, and all S-Corps begin as a C-Corp or LLC. When you initially incorporate, your company will automatically become a standard C-Corp, and only after you file multiple forms can you transition to an S-Corp for federal tax purposes.
If there is an issue with a product, an S-Corp protects you. Compensation can only be taken from the S-Corp’s assets, not your personal assets.
Start Your S-Corp Now
How do you know which type of corporation you want to register your business as when they are both so similar? Both types of corporations offer owners protection from individual liability, so shareholders (and directors, officers, and employees) are typically not personally responsible for business debts. C-Corps and S-Corps require similar paperwork. In addition, both are owned by shareholders, have a Board of Directors with annual meetings, and are managed by executive officers. It is also a requirement that both types of corporations pay annual fees, set up bylaws, and issue stock. Basically, an S-Corporation is the legal equivalent of a regular C-Corporation. Both have the same rights. They just pays taxes differently.
But why opt for an S-Corp? What are the benefits of setting up your state of Rhode Island business as an S-Corp?
The main difference between a C and S-Corporation is that an S-Corp is not treated as a disregarded entity. It is a pass-through tax entity. While a C-Corp’s tax attributes are determined at the entity level, an S-Corp determines its own income, deductions, credits, etc. It spreads out the tax attributes among its owners (or to its sole owner) as part of shared ownership. Likewise, within an S-Corporation, the profits are passed on to the shareholders, who are then taxed based on their personal returns. Unlike a C-Corporation, an S-Corporation is required to file an annual information tax return. A few other differences are that S-Corps must have no more than 100 shareholders (all individuals, not corporations), have only one class of stock, and be owned by U.S. citizens or resident aliens.
There are advantages to establishing an S-Corp in Rhode Island. Registering as an S-Corporation offers you:
- The ability to operate as a corporation even if the owner leaves the company or passes away.
- Pass-through taxation, as owners report their share of the profits and losses on their individual tax returns.
- A way out of being taxed twice, the way you would be in a C-Corporation. There is no double taxation occurring--once as income and again as dividend income. You save more money!
- The opportunity to issue shares of stock to increase the value of your business.
- A deduction of 20% of all S-Corp income on your personal tax return, which can significantly reduce your tax burden.
- The ability to write off the S-Corp’s losses on shareholders’ individual tax returns.
- Annual tax filing requirements, unlike C-Corps which must file every quarter.
- Corporate status, which means shareholders, directors, and officers are protected from sharing liability as long as there is no evidence of fraud or other misdeeds
But there are a few disadvantages to starting an S-Corp. One of those is the fact that, unlike a C-Corp, there are restrictions on ownership if you start a Rhode Island S-Corp. S-Corporations can only be owned by United States citizens or resident aliens. Additionally, an S-Corp permits only 100 shareholders, while for a C-Corp, there is no limit. But overall, the benefits far outweigh the setbacks, and an S-Corporation is an excellent choice for many entrepreneurs looking to start a business in Rhode Island.
Learn the Benefits of an S-Corp
Educating yourself about the different types of corporations can help you assess what is the right business structure for you. It is advised that you should incorporate when you anticipate taking investments or when your business approaches material size or complexity.
Decide on a Registered Agent
Next, figure out who the Registered Agent for the corporation should be. The State of Rhode Island requires every corporation in the state to have one. This enables the state to ensure the delivery of legal mail and that court documents can be tracked appropriately. The Registered Agent will also act as the contact point between the Rhode Island Secretary of State and the corporation. Once you assign someone as your Registered Agent, they can receive official correspondence and documents on behalf of your business.
A Registered Agent can be either an individual who is a resident of Rhode Island 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. Your Registered Agent’s information would go on your most important Rhode Island Secretary of State corporation forms.
- Possess a physical street address located in Rhode Island (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 Rhode Island Registered 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 Rhode Island state 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. An alternative you can look into is hiring a Rhode Island Commercial Registered Agent Service. We also offer a Registered Agent Service for a small charge that you can include as an add-on to your shopping cart.
Decide on a Registered Agent
Next, figure out who the Registered Agent for the corporation should be. The State of Rhode Island requires every corporation in the state to have one.
Obtain an Employer
Identification Number
Next, your Rhode Island S-corp 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. All corporations require an EIN, even if you don’t have any employees.
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 apply 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.
If you know your S-Corp 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.
Obtain an Employer Identification Number
Next, your S-Corp 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. All corporations require an EIN, even if you don’t have any employees.
Submit Your Articles
of Incorporation
To create an S-Corp in Rhode Island, you will also need to register your business by filling out and submitting the Articles of Incorporation. The Articles of Incorporation is a form that should be filed (and maintained) with the state of Rhode Island. It establishes the basic elements of the corporation, such as the name and address of the corporation, the number and classes of stock, and certain indemnification provisions. Prior to filing, the Articles of Incorporation must be signed by each incorporator in order to authenticate it. The document can be repealed or amended with the approval of the Board of Directors.
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 S-Corp 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 Rhode Island Articles of Incorporation form is accepted, congratulations! Your company now exists as a recognized legal entity that is authorized to conduct business within the State of Rhode Island.
Submit Your Articles of Incorporation
To create an S-Corp in Rhode Island , you will also need to register your business by filling out and submitting the Articles of Incorporation. The Articles of Incorporation is a form that should be filed (and maintained) with the state of Rhode Island.
Draft Your Corporate Bylaws
First, what are bylaws? If you’ve heard of an Operating Agreement, this is just like that, but “bylaws” is the term usually used when referring to a corporation. There is no set criteria for what your bylaws should look like, but typically, they should set forth internal rules and procedures for your SD S-Corp. Basically, bylaws are rules of operation that create the company’s structure, ensuring that employees, shareholders, and executives are in the loop about how the business will be run.
Key points are covered in the corporate bylaws document, such as when annual meetings will be held, the size of your Board of Directors, and how this form will be amended if need be. In addition, member duties are explained and solutions to common disputes between parties are offered. Voting rights and salaries are discussed, and “what if” scenarios are presented. Having bylaws allows you to set up a structure that works for your business’s unique needs instead of adhering to default regulations within the state.
While bylaws are not required in most states, they are required in Rhode Island. It is important to establish a set of bylaws that ensure your business runs smoothly. Filling out and filing this document prior to starting an S-Corporation in Rhode Island provides protection for your business.
You can use this corporate bylaws generator to get a sense of what goes into a typical set of bylaws. To ensure it is done correctly, you can have a lawyer look over your bylaws prior to submission to ensure all necessary rules and scenarios are covered. Get legal advice from our partner Rocket Lawyer.
Draft Your Corporate Bylaws
First, what are bylaws? If you’ve heard of an Operating Agreement, this is just like that, but “bylaws” is the term usually used when referring to a corporation. There is no set criteria for what your bylaws should look like, but typically, they should set forth internal rules and procedures for your RI S-Corp.
Elect a Board of Directors
Rhode Island law requires one or more director(s). The Board of Directors, while they are not involved in the daily tasks of running a business, represent or govern the corporation. Their duties include handling finances and fulfilling legal requirements, as well as determining the mission of the company.
People who do not work for your company can be a part of your Board of Directors. In fact, many businesses turn to lawyers or other business owners to fill in a spot on their Board of Directors. That way, they receive outside expertise from them, plus they may come with their own additional business contacts.
These board members must adhere to something called “the duty of loyalty,” which means that directors and officers of an S-Corporation can only make decisions without any personal economic conflict. The duty of loyalty is breached if something like a self-interested transaction occurs or a business opportunity is stolen. Plus, there is also the “duty of care” to consider. Members of the Board of Directors must make decisions that are in the best interests of the corporation at all times. For example, making a decision that causes serious losses for the shareholders would mean they are in violation of their duty of care--and they can be sued for this.
Your board members will have to hold meetings to make important decisions, such as issuing shares or amending something in the Articles of Incorporation. The Board of Directors typically receives equal voting rights (some states, like Delaware, are an exception) when making these decisions. During the first meeting of the S-Corporation's Board of Directors, directors can appoint officers, decide on bylaws, select a corporate bank, and more. All subsequent meetings must be held annually, though, of course, if more are needed, more can be held.
Minutes of the meeting, which is the recorded documentation of what was discussed or what happened during a meeting, must be recorded to exhibit transparency in business operations, but they do not need to be filed with the state. Instead, these should be kept with your other corporate records, such as Articles of Incorporation and bylaws. These documents should be saved for at least seven years in order to protect your company.
Elect a Board of Directors
First, familiarize yourself with the roles within an S-Corporation. There are three groups:
- Shareholders
- Board of Directors
- Officers
Appoint Corporate Officers
Shareholders and directors only have the ability to make decisions as part of a group, after holding group meetings and taking votes. An individual shareholder or director does not have the power to do anything--if there are multiple shareholders and directors. If a corporation has only one shareholder or director, the decision-making, of course, falls on that person without the need for a group meeting. Officers, on the other hand, do not operate in groups. An officer holding the position of president, chief executive officer, or treasurer, for example, is an agent of the corporation and has the authority to act on behalf of the corporation on his or her own. Within smaller S-Corps, directors are sometimes also officers and shareholders. In that case, even though the same person is serving in multiple roles, each role has very different responsibilities and is treated as such.
Shareholders are the owners of the corporation, and they elect the Board of Directors. The directors, in unison, oversee and direct corporation affairs and make business decisions. They employ officers who carry out the Board of Directors’ decisions. Officers are responsible for the day-to-day operations of the company. An officer can be terminated by the Board of Directors at any time. Rhode Island requirements state that there should be a president, secretary, and treasurer on the Board of Directors. One person may hold two offices.
Appoint Corporate Officers
Shareholders and directors only have the ability to make decisions as part of a group, after holding group meetings and taking votes. An individual shareholder or director does not have the power to do anything - if there are multiple shareholders and directors.
Issue Stock to your Shareholders
One of the benefits of having an S-Corporation is being able to issue shares of stock to raise funds for your business. Shares represent the amount of money invested by the shareholders in the company. Issuing stock to your shareholders allows you to finance your business without relying on debt. Unlike taking out a business loan, you do not pay interest that eats at your profits each month. The value of your business assets can be assessed by taking a look at what amount of your business assets are owned by shareholders vs. lenders. Corporations that have a higher proportion of the company owned by lenders makes an investment in the business appear riskier. If shareholders do invest in your business and purchase stock, keep in mind that if your business fails, you would have to pay back your loans and shareholders.
While there are many advantages to issuing stock, keep in mind that shareholders have an ownership stake in the company. This means that they have certain rights, such as the ability to participate in voting and the assurance that they will be collecting dividends. Profits will be shared and decisions will have to be made in unison. The more stock you issue to shareholders, the smaller your ownership in the business (and the less of a say you have in business major business decisions). On the plus side, when your business grows, you can buy out the other shareholders and get your ownership back.
Issuing stock is not a requirement for S-Corporations, but a privilege that you can make use of if you choose. Doing so can help you fund your business if you are growing and have large, expensive projects planned in the near future. In that case, you can decide how much capital you need and figure out how many shares you’d like to issue and at what price per share. You will already have a number for how many shares you have to offer (that was decided when you filed your Articles of Incorporation). To properly assess the accurate value of each share, determine your company’s net worth first. This will help you figure out what percentage of ownership you believe each share is worth.
Typically, appointed Board of Directors can issue stock whenever and to whomever, as long as the recipient has a brokerage account and is over 18 years old. But within an S-Corp, there are a few more limitations that a C-Corp does not have. While C-Corporations can be owned by any individual or legal entity--foreign or domestic--S-Corporations can only be owned by United States citizens or resident aliens. On top of that, an S-Corp does not allow an unlimited number of shareholders. It maxes out at 100. Also, S-Corps are not permitted to be owned by a C-Corp, another S-Corp, an LLC, a partnership, or many trusts. Lastly, unlike in a C-Corp where shareholders have the option between different stock classes (common, preferred, income, value, growth), an S-Corp only permits one stock class (common).
Another thing that can limit you here is if you’ve chosen to classify your S-Corp as a private corporation. This is typically a smaller corporation where the stock isn't offered to the public. A publiC-Corporation is authorized to sell their stock to the public, while a private company can’t trade its share on public stock exchanges. But a private corporation is not always small. Many big companies are privately held--such as Dell, Koch Industries, Deloitte, and Cargill. It can be harder for private corporations to raise funds, but it can be important in order to maintain family ownership.
Whoever your corporation may sell stock to, it’s important to have a shareholder agreement for protection. This would explain the shareholder’s rights and voting power within the S-Corporation. You will want to decide and let you shareholders know what kind of say they have in the organization or management of the company when they are issued stock. Unlike most states, Rhode Island does not require an annual shareholder meeting.
Issue Stock to your Shareholders
One of the benefits of having an S-Corporation is being able to issue shares of stock to raise funds for your business. Shares represent the amount of money invested by the shareholders in the company. Issuing stock to your shareholders allows you to finance your business without relying on debt.
Familiarize Yourself with the
State’s Taxes and Licenses
Income from pass-through entities, such as a Rhode Island Limited Liability Company and Rhode Island S-Corp, “passes through” the business to the owners, who are required to report this information on their personal tax returns. In that case, each individual S-Corp member would then have to pay taxes on his or her share of the S-Corp’s income. The S-Corp itself does not pay federal income taxes, but there are other various taxes that the business will have to pay.
For example, employers owe payroll tax on employees wages. Additionally, Rhode Island has a sales tax for businesses that sell, rent or lease taxable tangible personal property at retail in the state of Rhode Island. Rhode Island’s personal income tax rates are progressive, ranging from 3.75% to 5.99%. For more information on Rhode Island taxes, visit the Rhode Island Division of Taxation.
In addition, there may be extra fees for certain insurances, permits, and licenses, depending on the state’s laws and the type of business you own. For example, you most likely will need worker’s compensation, unemployment insurance, retail sales permits, etc. Most Rhode Island licenses can be found here rel="nofollow". Find out what the requirements are for the location where you plan to open your Rhode Island business. 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
Income from pass-through entities, such as a Rhode Island Limited Liability Company and Rhode Island S-Corp, “passes through” the business to the owners, who are required to report this information on their personal tax returns. In that case, each individual S-Corp member would then have to pay taxes on his or her share of the S-Corp’s income.
File an Annual Report
It is required by the State of Rhode Island for S-Corp owners to file a yearly report that updates all the information that the RI Secretary of State has on file. This report is typically called the Annual Report. It is due by March 1 - you can start filing on January 1 - along with a fee of $50, payable to the Rhode Island Secretary of State. You can file online on the Rhode Island Secretary of State website. You can also use the same website to download the paper form if you do not prefer to file online. Filing an Annual Report is necessary for maintaining an active status after starting an S-Corp in Rhode Island. Not filing the report or paying the fee will result in being presented a Rhode Island S-Corp dissolution form, after which the state will dissolve your business.
The report can be rather complex–requiring the deciphering of gross receipts, dividends, interest, losses, and all Rhode Island S-Corp fees–and 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.
File an Annual Report
Like most states, the State of Rhode Island requires all S-Corp owners to file a yearly report that updates all the information that the Rhode Island Secretary of State has on file. This report is typically called the Annual Report. It is due by the first day of the registration anniversary month, meaning if you started your business on March 15, then your annual report is due every year by March 1.
Raise Funds for Your S-Corp
You can’t start a business with zero capital. There are legal fees, document filing fees, taxes, employees to pay, as well as the costs of operating a business. Some of the most commonly-used options for obtaining funding for your S-Corp 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
- Issuing stock to shareholders
Many new S-Corporation 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 people to your team. S-Corporations may have a single person as the company's owner, or an unlimited number of shareholders participating in the ownership of the business. 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 bylaws and ensure that you are still the primary owner of your Rhode Island S-Corporation.
Raise Funds for Your S-Corp
You can’t start a business with zero capital. There are legal fees, document filing fees, taxes, employees to pay, as well as the costs of operating a business.
Create a Business Website
Creating a website for your Rhode Island 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 S-Corp 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.
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 Rhode Island corp name tips:
- Follow S-Corp naming guidelines. A corporation’s name usually has to include words, like Corporation, Incorporated, Company, or Limited; or abbreviations, like Corp., Inc., Co., or Ltd. 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 getting an S-Corp in Rhode Island you will need an original name that is not in use by another corporation. To check if a name has already been taken, you can try the Name Availability Search. If you are not ready to file an S-Corp in Rhode Island today but want to reserve a name in the meantime, you can do so by filling out the form (and paying a $25 fee) here. This puts a hold on the name for 120 days.
- Make sure it is available as a web domain. This way, you can find out if another company outside of Rhode Island has a corporation 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
Once you become an official Rhode Island corporation, make sure you keep your S-Corp compliant. Remember all important dates and make all necessary payments on time. Know all of the laws regarding the issuing of stocks. Host all necessary annual meetings. This is mandatory if you don’t want your new business to run into any issues. 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.
Next, make sure you’ve obtained all necessary permits, licenses, and insurances that your RI corp might need—and you’re good to go! Begin operating your Rhode Island business with peace of mind, knowing that you are protected by an S-Corp in case anything unforeseeable affects your new business venture.
Begin Operating Your Business
Once you become an official Rhode Island corporation, make sure you keep your S-Corp compliant. Remember all important dates and make all necessary payments on time. Know all of the laws regarding the issuing of stocks. Host all necessary annual meetings.
Pennsylvania S-Corp
Learn the Benefits of an S-Corp
When you decide to start a business, there are a number of business entities to choose from. Each has its own advantages and disadvantages, which we will introduce to you here. Prospective business owners should consult with professionals, such as a business attorney and accountants, before making the final decision. But educating yourself about the different types of corporations can help you assess what is the right business structure for you beforehand.
But first, are you ready to incorporate? It is advised that you should incorporate when you anticipate taking investments or when your business approaches material size or complexity.
Typically, “material size” means a business with revenue above $100,000. Once you know you’re ready, you have the option between choosing to classify your business as a C-Corporation or an S-Corporation. While S-Corps used to be the way to go for small businesses (it’s even been nicknamed the “Small BusinesS-Corporation”), thanks to the 2017 Tax Cuts and Jobs Act, C-Corps may now offer lower corporate tax rates to smaller business. Now, S-Corps are sometimes advisable for larger businesses. But keep in mind that C-Corps give you more options to expand and raise money, which can be very beneficial to a larger business. You may want to discuss the differences with a financial advisor or lawyer who can help break down all of the costs to help you assess what will work best for you.
Whether you choose to structure your business entity as a C or S-Corporation will determine how much you’ll pay in taxes, the ways you’re permitted to raise money, and the ease with which you can expand as your business grows. The standard and most common type of corporation is a C-Corporation. In fact, a C-Corp is the default type of corporation, and all S-Corps begin as a C-Corp or LLC. When you initially incorporate, your company will automatically become a standard C-Corp, and only after you file multiple forms can you transition to an S-Corp for federal tax purposes.
If there is an issue with a product, an S-Corp protects you. Compensation can only be taken from the S-Corp’s assets, not your personal assets.
Start Your S-Corp NowHow do you know which type of corporation you want to register your business as when they are both so similar? Both types of corporations offer owners protection from individual liability, so shareholders (and directors, officers, and employees) are typically not personally responsible for business debts. C-Corps and S-Corps require similar paperwork. In addition, both are owned by shareholders, have a Board of Directors with annual meetings, and are managed by executive officers. It is also a requirement that both types of corporations pay annual fees, set up bylaws, and issue stock. Basically, an S-Corporation is the legal equivalent of a regular C-Corporation. Both have the same rights. They just pays taxes differently.
But why opt for an S-Corp? What are the benefits of setting up your state of Pennsylvania business as an S-Corp?
The main difference between a C and S-Corporation is that an S-Corp is not treated as a disregarded entity. It is a pass-through tax entity. While a C-Corp’s tax attributes are determined at the entity level, an S-Corp determines its own income, deductions, credits, etc. It spreads out the tax attributes among its owners (or to its sole owner) as part of shared ownership. Likewise, within an S-Corporation, the profits are passed on to the shareholders, who are then taxed based on their personal returns. Unlike a C-Corporation, an S-Corporation is required to file an annual information tax return. A few other differences are that S-Corps must have no more than 100 shareholders (all individuals, not corporations), have only one class of stock, and be owned by U.S. citizens or resident aliens.
There are advantages to establishing an S-Corp in Pennsylvania. Registering as an S-Corporation offers you:
- The ability to operate as a corporation even if the owner leaves the company or passes away.
- Pass-through taxation, as owners report their share of the profits and losses on their individual tax returns.
- A way out of being taxed twice, the way you would be in a C-Corporation. There is no double taxation occurring--once as income and again as dividend income. You save more money!
- The opportunity to issue shares of stock to increase the value of your business.
- A deduction of 20% of all S-Corp income on your personal tax return, which can significantly reduce your tax burden.
- The ability to write off the S-Corp’s losses on shareholders’ individual tax returns.
- Annual tax filing requirements, unlike C-Corps which must file every quarter.
- Corporate status, which means shareholders, directors, and officers are protected from sharing liability as long as there is no evidence of fraud or other misdeeds
But there are a few disadvantages to starting an S-Corp. One of those is the fact that, unlike a C-Corp, there are restrictions on ownership if you start a Pennsylvania S-Corp. S-Corporations can only be owned by United States citizens or resident aliens. Additionally, an S-Corp permits only 100 shareholders, while for a C-Corp, there is no limit. But overall, the benefits far outweigh the setbacks, and an S-Corporation is an excellent choice for many entrepreneurs looking to start a business in Pennsylvania.
Learn the Benefits of an S-Corp
Educating yourself about the different types of corporations can help you assess what is the right business structure for you. It is advised that you should incorporate when you anticipate taking investments or when your business approaches material size or complexity.
Decide on a Registered Agent
Next, figure out who the Registered Agent for the corporation should be. The State of Pennsylvania requires every corporation in the state to have one. This enables the state to ensure the delivery of legal mail and that court documents can be tracked appropriately. The Registered Agent will also act as the contact point between the Pennsylvania Department of State and the corporation. Once you assign someone as your Registered Agent, they can receive official correspondence and documents on behalf of your business.
A Registered Agent can be either an individual who is a resident of Pennsylvania 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. Your Registered Agent’s information would go on your most important Pennsylvania Department of State corporation forms.
- Possess a physical street address located in Pennsylvania (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 Pennsylvania Registered 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 Pennsylvania state 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. An alternative you can look into is hiring a Pennsylvania Commercial Registered Agent Service. We also offer a Registered Agent Service for a small charge that you can include as an add-on to your shopping cart.
Decide on a Registered Agent
Next, figure out who the Registered Agent for the corporation should be. The State of Pennsylvania requires every corporation in the state to have one.
Obtain an Employer
Identification Number
Next, your S-Corp 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. All corporations require an EIN, even if you don’t have any employees.
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 apply 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.
If you know your S-Corp 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.
Obtain an Employer Identification Number
Next, your S-Corp 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. All corporations require an EIN, even if you don’t have any employees.
Submit Your Articles
of Incorporation
To create an S-Corp in Pennsylvania, you will also need to register your business by filling out and submitting the Articles of Incorporation. The Articles of Incorporation is a form that should be filed (and maintained) with the state of Pennsylvania. It establishes the basic elements of the corporation, such as the name and address of the corporation, the number and classes of stock, and certain indemnification provisions. Prior to filing, the Articles of Incorporation must be signed by each incorporator in order to authenticate it. The document can be repealed or amended with the approval of the Board of Directors.
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 S-Corp 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 Pennsylvania Articles of Incorporation form is accepted, congratulations! Your company now exists as a recognized legal entity that is authorized to conduct business within the State of Pennsylvania.
Submit Your Articles of Incorporation
To create an S-Corp in Pennsylvania, you will also need to register your business by filling out and submitting the Articles of Incorporation. The Articles of Incorporation is a form that should be filed (and maintained) with the state of Pennsylvania.
Draft Your Corporate Bylaws
First, what are bylaws? If you’ve heard of an Operating Agreement, this is just like that, but “bylaws” is the term usually used when referring to a corporation. There is no set criteria for what your bylaws should look like, but typically, they should set forth internal rules and procedures for your S-Corporation. Basically, bylaws are rules of operation that create the company’s structure, ensuring that employees, shareholders, and executives are in the loop about how the business will be run.
Key points are covered in the corporate bylaws document, such as when annual meetings will be held, the size of your Board of Directors, and how this form will be amended if need be. In addition, member duties are explained and solutions to common disputes between parties are offered. Voting rights and salaries are discussed, and “what if” scenarios are presented. Having bylaws allows you to set up a structure that works for your business’s unique needs instead of adhering to default regulations within the state.
While bylaws are required in some states, they are not required in Pennsylvania. Nevertheless, it is important to establish a set of bylaws that ensure your business runs smoothly. Filling out and filing this document prior to starting an S-Corporation in Pennsylvania provides protection for your business.
You can use this corporate bylaws generator to get a sense of what goes into a typical set of bylaws. To ensure it is done correctly, you can have a lawyer look over your bylaws prior to submission to ensure all necessary rules and scenarios are covered. Get legal advice from our partner Rocket Lawyer.
Draft Your Corporate Bylaws
First, what are bylaws? If you’ve heard of an Operating Agreement, this is just like that, but “bylaws” is the term usually used when referring to a corporation. There is no set criteria for what your bylaws should look like, but typically, they should set forth internal rules and procedures for your S-Corporation.
Elect a Board of Directors
Pennsylvania law requires one or more director(s). The Board of Directors, while they are not involved in the daily tasks of running a business, represent or govern the corporation. Their duties include handling finances and fulfilling legal requirements, as well as determining the mission of the company.
People who do not work for your company can be a part of your Board of Directors. In fact, many businesses turn to lawyers or other business owners to fill in a spot on their Board of Directors. That way, they receive outside expertise from them, plus they may come with their own additional business contacts.
These board members must adhere to something called “the duty of loyalty,” which means that directors and officers of an S-Corporation can only make decisions without any personal economic conflict. The duty of loyalty is breached if something like a self-interested transaction occurs or a business opportunity is stolen. Plus, there is also the “duty of care” to consider. Members of the Board of Directors must make decisions that are in the best interests of the corporation at all times. For example, making a decision that causes serious losses for the shareholders would mean they are in violation of their duty of care--and they can be sued for this.
Your board members will have to hold meetings to make important decisions, such as issuing shares or amending something in the Articles of Incorporation. The Board of Directors typically receives equal voting rights (some states, like Delaware, are an exception) when making these decisions. During the first meeting of the S-Corporation's Board of Directors, directors can appoint officers, decide on bylaws, select a corporate bank, and more. All subsequent meetings must be held annually, though, of course, if more are needed, more can be held.
Minutes of the meeting, which is the recorded documentation of what was discussed or what happened during a meeting, must be recorded to exhibit transparency in business operations, but they do not need to be filed with the state. Instead, these should be kept with your other corporate records, such as Articles of Incorporation and bylaws. These documents should be saved for at least seven years in order to protect your company.
Elect a Board of Directors
First, familiarize yourself with the roles within an S-Corporation. There are three groups:
- Shareholders
- Board of Directors
- Officers
Appoint Corporate Officers
Shareholders and directors only have the ability to make decisions as part of a group, after holding group meetings and taking votes. An individual shareholder or director does not have the power to do anything--if there are multiple shareholders and directors. If a corporation has only one shareholder or director, the decision-making, of course, falls on that person without the need for a group meeting. Officers, on the other hand, do not operate in groups. An officer holding the position of president, chief executive officer, or treasurer, for example, is an agent of the corporation and has the authority to act on behalf of the corporation on his or her own. Within smaller S-Corps, directors are sometimes also officers and shareholders. In that case, even though the same person is serving in multiple roles, each role has very different responsibilities and is treated as such.
Shareholders are the owners of the corporation, and they elect the Board of Directors. The directors, in unison, oversee and direct corporation affairs and make business decisions. They employ officers who carry out the Board of Directors’ decisions. Officers are responsible for the day-to-day operations of the company. An officer can be terminated by the Board of Directors at any time. Pennsylvania requirements state that there should be a president, secretary, and treasurer on the Board of Directors in an S-Corporation.
Appoint Corporate Officers
Shareholders and directors only have the ability to make decisions as part of a group, after holding group meetings and taking votes. An individual shareholder or director does not have the power to do anything - if there are multiple shareholders and directors.
Issue Stock to your Shareholders
One of the benefits of having an S-Corporation is being able to issue shares of stock to raise funds for your business. Shares represent the amount of money invested by the shareholders in the company. Issuing stock to your shareholders allows you to finance your business without relying on debt. Unlike taking out a business loan, you do not pay interest that eats at your profits each month. The value of your business assets can be assessed by taking a look at what amount of your business assets are owned by shareholders vs. lenders. Corporations that have a higher proportion of the company owned by lenders makes an investment in the business appear riskier. If shareholders do invest in your business and purchase stock, keep in mind that if your business fails, you would have to pay back your loans and shareholders.
While there are many advantages to issuing stock, keep in mind that shareholders have an ownership stake in the company. This means that they have certain rights, such as the ability to participate in voting and the assurance that they will be collecting dividends. Profits will be shared and decisions will have to be made in unison. The more stock you issue to shareholders, the smaller your ownership in the business (and the less of a say you have in business major business decisions). On the plus side, when your business grows, you can buy out the other shareholders and get your ownership back.
Issuing stock is not a requirement for S-Corporations, but a privilege that you can make use of if you choose. Doing so can help you fund your business if you are growing and have large, expensive projects planned in the near future. In that case, you can decide how much capital you need and figure out how many shares you’d like to issue and at what price per share. You will already have a number for how many shares you have to offer (that was decided when you filed your Articles of Incorporation). To properly assess the accurate value of each share, determine your company’s net worth first. This will help you figure out what percentage of ownership you believe each share is worth.
Typically, appointed Board of Directors can issue stock whenever and to whomever, as long as the recipient has a brokerage account and is over 18 years old. But within an S-Corp, there are a few more limitations that a C-Corp does not have. While C-Corporations can be owned by any individual or legal entity--foreign or domestic--S-Corporations can only be owned by United States citizens or resident aliens. On top of that, an S-Corp does not allow an unlimited number of shareholders. It maxes out at 100. Also, S-Corps are not permitted to be owned by a C-Corp, another S-Corp, an LLC, a partnership, or many trusts. Lastly, unlike in a C-Corp where shareholders have the option between different stock classes (common, preferred, income, value, growth), an S-Corp only permits one stock class (common).
Another thing that can limit you here is if you’ve chosen to classify your S-Corp as a private corporation. This is typically a smaller corporation where the stock isn't offered to the public. A publiC-Corporation is authorized to sell their stock to the public, while a private company can’t trade its share on public stock exchanges. But a private corporation is not always small. Many big companies are privately held--such as Dell, Koch Industries, Deloitte, and Cargill. It can be harder for private corporations to raise funds, but it can be important in order to maintain family ownership.
Whoever your corporation may sell stock to, it’s important to have a shareholder agreement for protection. This would explain the shareholder’s rights and voting power within the S-Corporation. You will want to decide and let you shareholders know what kind of say they have in the organization or management of the company when they are issued stock. Pennsylvania requires an annual shareholder meeting.
Issue Stock to your Shareholders
One of the benefits of having an S-Corporation is being able to issue shares of stock to raise funds for your business. Shares represent the amount of money invested by the shareholders in the company. Issuing stock to your shareholders allows you to finance your business without relying on debt.
Familiarize Yourself with the
State’s Taxes and Licenses
Income from pass-through entities, such as a Pennsylvania Limited Liability Company or a Pennsylvania S-Corp, “passes through” the business to the owners, who are then required to report this information on their personal tax returns. Each individual S-Corp member will then have to pay taxes on his or her share of the company’s income. The corporation itself does not pay federal income taxes. In Pennsylvania, S-Corps are subject to the 9.99% corporate net income tax, but only to the extent of built-in-gains. Shareholders in S-Corporations are taxed at the personal income tax rate of 3.07%. There is also a capital stock/foreign franchise tax that all Pennsylvania corporation owners must pay.
In addition, some states charge other various taxes. For example, employers owe payroll tax on employees wages. Additionally, Pennsylvania has a sales and use tax, as well as other taxes. For more information on Pennsylvania taxes, visit the Commonwealth of Pennsylvania website.
In addition, there may be extra fees for certain insurances, permits, and licenses, depending on the state’s laws and the type of business you own. For example, you most likely will need worker’s compensation, unemployment insurance, building permits, etc. Pennsylvania has a handy Local Registrations, Permits, Zoning feature on the Pennsylvania Government website which, when you type in your corporation’s address, will tell you which additional requirements there are for the location where you plan to open your Pennsylvania business.
Familiarize Yourself with the State’s Taxes and Licenses
Income from pass-through entities, such as a Pennsylvania Limited Liability Company or a Pennsylvania S-Corp, “passes through” the business to the owners, who are then required to report this information on their personal tax returns. Each individual S-Corp member will then have to pay taxes on his or her share of the company’s income.
File an Annual Renewal
Corporation owners are typically required to submit a report that updates all the information that the Secretary of State (SOS) has on file so that business names that are no longer in use may be placed back into the stream of commerce. This report is usually called the Annual Report, it is usually submitted yearly to the SOS in most states. In Pennsylvania, it is called the Decennial Report, and it is filed every ten years only during the years that end with the number one (for example, 2001, 2011, 2021). It is due by May 15 during those years along with a PA filing fee of $70 payable to the PA Department of State (not the SOS). There isn’t an online filing option at the moment. Instead, you can print the form here
Filing a Decennial Report is necessary for maintaining an active status after starting an S-Corp in PA. Not filing the report or paying the fee will result in being presented a Pennsylvania C-Corp dissolution form, after which the state will dissolve your business.
The report can be rather complex–requiring the deciphering of gross receipts, dividends, interest, losses, and all Pennsylvania S-Corp fees–and 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.
File an Annual Renewal
Corporation owners are typically required to submit a report that updates all the information that the Secretary of State (SOS) has on file so that business names that are no longer in use may be placed back into the stream of commerce.
Raise Funds for Your S-Corp
You can’t start a business with zero capital. There are legal fees, document filing fees, taxes, employees to pay, as well as the costs of operating a business. Some of the most commonly-used options for obtaining funding for your S-Corp 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
- Issuing stock to shareholders
Many new S-Corporation 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 people to your team. S-Corporations may have a single person as the company's owner, or an unlimited number of shareholders participating in the ownership of the business. 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 bylaws and ensure that you are still the primary owner of your Pennsylvania S-Corporation.
Raise Funds for Your S-Corp
You can’t start a business with zero capital. There are legal fees, document filing fees, taxes, employees to pay, as well as the costs of operating a business.
Create a Business Website
Creating a website for your Pennsylvania 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 S-Corp 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.
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 Pennsylvania corp name tips:
- Follow S-Corp naming guidelines. A corporation’s name usually has to include words, like Corporation, Incorporated, Company, or Limited; or abbreviations, like Corp., Inc., Co., or Ltd. 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 getting an S-Corp in Pennsylvania you will need an original name that is not in use by another corporation. To check if a name has already been taken, you can search the Business Name Availability Database.
- Make sure it is available as a web domain. This way, you can find out if another company outside of Pennsylvania has a corporation 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
Once you become an official S-Corporation in the State of Pennsylvania, make sure you keep your S-Corp compliant. Remember all important dates and make all necessary payments on time. Know all of the laws regarding the issuing of stocks. Host all necessary annual meetings. This is mandatory if you don’t want your new business to run into any issues. 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.
Next, make sure you’ve obtained all necessary permits, licenses, and insurances that your PA corp might need—and you’re good to go! Begin operating your Pennsylvania business with peace of mind, knowing that you are protected by an S-Corp in case anything unforeseeable affects your new business venture.
Begin Operating Your Business
Once you become an official S-Corporation in the State of Pennsylvania, make sure you keep your S-Corp compliant. Remember all important dates and make all necessary payments on time. Know all of the laws regarding the issuing of stocks. Host all necessary annual meetings.
Oregon S-Corp
Learn the Benefits of an S-Corp
When you decide to start a business, there are a number of business entities to choose from. Each has its own advantages and disadvantages, which we will introduce to you here. Prospective business owners should consult with professionals, such as a business attorney and accountants, before making the final decision. But educating yourself about the different types of corporations can help you assess what is the right business structure for you beforehand.
But first, are you ready to incorporate? It is advised that you should incorporate when you anticipate taking investments or when your business approaches material size or complexity.
Typically, “material size” means a business with revenue above $100,000. Once you know you’re ready, you have the option between choosing to classify your business as a C-Corporation or an S-Corporation. While S-Corps used to be the way to go for small businesses (it’s even been nicknamed the “Small BusinesS-Corporation”), thanks to the 2017 Tax Cuts and Jobs Act, C-Corps may now offer lower corporate tax rates to smaller business. Now, S-Corps are sometimes advisable for larger businesses. But keep in mind that C-Corps give you more options to expand and raise money, which can be very beneficial to a larger business. You may want to discuss the differences with a financial advisor or lawyer who can help break down all of the costs to help you assess what will work best for you.
Whether you choose to structure your business entity as a C or S-Corporation will determine how much you’ll pay in taxes, the ways you’re permitted to raise money, and the ease with which you can expand as your business grows. The standard and most common type of corporation is a C-Corporation. In fact, a C-Corp is the default type of corporation, and all S-Corps begin as a C-Corp or LLC. When you initially incorporate, your company will automatically become a standard C-Corp, and only after you file multiple forms can you transition to an S-Corp for federal tax purposes.
If there is an issue with a product, an S-Corp protects you. Compensation can only be taken from the S-Corp’s assets, not your personal assets.
Start Your S-Corp NowHow do you know which type of corporation you want to register your business as when they are both so similar? Both types of corporations offer owners protection from individual liability, so shareholders (and directors, officers, and employees) are typically not personally responsible for business debts. C-Corps and S-Corps require similar paperwork. In addition, both are owned by shareholders, have a Board of Directors with annual meetings, and are managed by executive officers. It is also a requirement that both types of corporations pay annual fees, set up bylaws, and issue stock. Basically, an S-Corporation is the legal equivalent of a regular C-Corporation. Both have the same rights. They just pays taxes differently.
But why opt for an S-Corp? What are the benefits of setting up your state of Oregon business as an S-Corp?
The main difference between a C and S-Corporation is that an S-Corp is not treated as a disregarded entity. It is a pass-through tax entity. While a C-Corp’s tax attributes are determined at the entity level, an S-Corp determines its own income, deductions, credits, etc. It spreads out the tax attributes among its owners (or to its sole owner) as part of shared ownership. Likewise, within an S-Corporation, the profits are passed on to the shareholders, who are then taxed based on their personal returns. Unlike a C-Corporation, an S-Corporation is required to file an annual information tax return. A few other differences are that S-Corps must have no more than 100 shareholders (all individuals, not corporations), have only one class of stock, and be owned by U.S. citizens or resident aliens.
There are advantages to establishing an S-Corp in Oregon. Registering as an S-Corporation offers you:
- The ability to operate as a corporation even if the owner leaves the company or passes away.
- Pass-through taxation, as owners report their share of the profits and losses on their individual tax returns.
- A way out of being taxed twice, the way you would be in a C-Corporation. There is no double taxation occurring--once as income and again as dividend income. You save more money!
- The opportunity to issue shares of stock to increase the value of your business.
- A deduction of 20% of all S-Corp income on your personal tax return, which can significantly reduce your tax burden.
- The ability to write off the S-Corp’s losses on shareholders’ individual tax returns.
- Annual tax filing requirements, unlike C-Corps which must file every quarter.
- Corporate status, which means shareholders, directors, and officers are protected from sharing liability as long as there is no evidence of fraud or other misdeeds
But there are a few disadvantages to starting an S-Corp. One of those is the fact that, unlike a C-Corp, there are restrictions on ownership if you start a Oregon S-Corp. S-Corporations can only be owned by United States citizens or resident aliens. Additionally, an S-Corp permits only 100 shareholders, while for a C-Corp, there is no limit. But overall, the benefits far outweigh the setbacks, and an S-Corporation is an excellent choice for many entrepreneurs looking to start a business in Oregon.
Learn the Benefits of an S-Corp
Educating yourself about the different types of corporations can help you assess what is the right business structure for you. It is advised that you should incorporate when you anticipate taking investments or when your business approaches material size or complexity.
Decide on a Registered Agent
Next, figure out who the Registered Agent for the corporation should be. The State of Oregon requires every corporation in the state to have one. This enables the state to ensure the delivery of legal mail and that court documents can be tracked appropriately. The Registered Agent will also act as the contact point between the Oregon Secretary of State and the corporation. Once you assign someone as your Registered Agent, they can receive official correspondence and documents on behalf of your business.
A Registered Agent can be either an individual who is a resident of Oregon 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. Your Registered Agent’s information would go on your most important Oregon Secretary of State corporation forms.
- Possess a physical street address located in Oregon (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 Oregon Registered 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 Oregon state 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. An alternative you can look into is hiring a Oregon Commercial Registered Agent Service. We also offer a Registered Agent Service for a small charge that you can include as an add-on to your shopping cart.
Decide on a Registered Agent
Next, figure out who the Registered Agent for the corporation should be. The State of Oregon requires every corporation in the state to have one.
Obtain an Employer
Identification Number
Next, your Oregon S-Corp 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. All corporations require an EIN, even if you don’t have any employees.
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 apply 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.
If you know your S-Corp 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.
Obtain an Employer Identification Number
Next, your S-Corp 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. All corporations require an EIN, even if you don’t have any employees.
Submit Your Articles
of Incorporation
To create an S-Corp in Oregon, you will also need to register your business by filling out and submitting the Articles of Incorporation. The Articles of Incorporation is a form that should be filed (and maintained) with the state of Oregon. It establishes the basic elements of the corporation, such as the name and address of the corporation, the number and classes of stock, and certain indemnification provisions. Prior to filing, the Articles of Incorporation must be signed by each incorporator in order to authenticate it. The document can be repealed or amended with the approval of the Board of Directors.
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 S-Corp 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 Oregon Articles of Incorporation form is accepted, congratulations! Your company now exists as a recognized legal entity that is authorized to conduct business within the State of Oregon.
Submit Your Articles of Incorporation
To create an S-Corp in Oregon, you will also need to register your business by filling out and submitting the Articles of Incorporation. The Articles of Incorporation is a form that should be filed (and maintained) with the state of Oregon.
Draft Your Corporate Bylaws
First, what are bylaws? If you’ve heard of an Operating Agreement, this is just like that, but “bylaws” is the term usually used when referring to a corporation. There is no set criteria for what your bylaws should look like, but typically, they should set forth internal rules and procedures for your OR S-Corp. Basically, bylaws are rules of operation that create the company’s structure, ensuring that employees, shareholders, and executives are in the loop about how the business will be run.
Key points are covered in the corporate bylaws document, such as when annual meetings will be held, the size of your Board of Directors, and how this form will be amended if need be. In addition, member duties are explained and solutions to common disputes between parties are offered. Voting rights and salaries are discussed, and “what if” scenarios are presented. Having bylaws allows you to set up a structure that works for your business’s unique needs instead of adhering to default regulations within the state.
While bylaws are not required in some states, they are required in Oregon. It is important to establish a set of bylaws that ensure your business runs smoothly. Filling out and filing this document prior to starting an S-Corporation in Oregon provides protection for your business.
You can use this corporate bylaws generator to get a sense of what goes into a typical set of bylaws. To ensure it is done correctly, you can have a lawyer look over your bylaws prior to submission to ensure all necessary rules and scenarios are covered. Get legal advice from our partner Rocket Lawyer.
Draft Your Corporate Bylaws
First, what are bylaws? If you’ve heard of an Operating Agreement, this is just like that, but “bylaws” is the term usually used when referring to a corporation. There is no set criteria for what your bylaws should look like, but typically, they should set forth internal rules and procedures for your OR S-Corp.
Elect a Board of Directors
Oregon law requires one or more director(s). The Board of Directors, while they are not involved in the daily tasks of running a business, represent or govern the corporation. Their duties include handling finances and fulfilling legal requirements, as well as determining the mission of the company.
People who do not work for your company can be a part of your Board of Directors. In fact, many businesses turn to lawyers or other business owners to fill in a spot on their Board of Directors. That way, they receive outside expertise from them, plus they may come with their own additional business contacts.
These board members must adhere to something called “the duty of loyalty,” which means that directors and officers of an S-Corporation can only make decisions without any personal economic conflict. The duty of loyalty is breached if something like a self-interested transaction occurs or a business opportunity is stolen. Plus, there is also the “duty of care” to consider. Members of the Board of Directors must make decisions that are in the best interests of the corporation at all times. For example, making a decision that causes serious losses for the shareholders would mean they are in violation of their duty of care--and they can be sued for this.
Your board members will have to hold meetings to make important decisions, such as issuing shares or amending something in the Articles of Incorporation. The Board of Directors typically receives equal voting rights (some states, like Delaware, are an exception) when making these decisions. During the first meeting of the S-Corporation's Board of Directors, directors can appoint officers, decide on bylaws, select a corporate bank, and more. All subsequent meetings must be held annually, though, of course, if more are needed, more can be held.
Minutes of the meeting, which is the recorded documentation of what was discussed or what happened during a meeting, must be recorded to exhibit transparency in business operations, but they do not need to be filed with the state. Instead, these should be kept with your other corporate records, such as Articles of Incorporation and bylaws. These documents should be saved for at least seven years in order to protect your company.
Elect a Board of Directors
First, familiarize yourself with the roles within an S-Corporation. There are three groups:
- Shareholders
- Board of Directors
- Officers
Appoint Corporate Officers
Shareholders and directors only have the ability to make decisions as part of a group, after holding group meetings and taking votes. An individual shareholder or director does not have the power to do anything--if there are multiple shareholders and directors. If a corporation has only one shareholder or director, the decision-making, of course, falls on that person without the need for a group meeting. Officers, on the other hand, do not operate in groups. An officer holding the position of president, chief executive officer, or treasurer, for example, is an agent of the corporation and has the authority to act on behalf of the corporation on his or her own. Within smaller S-Corps, directors are sometimes also officers and shareholders. In that case, even though the same person is serving in multiple roles, each role has very different responsibilities and is treated as such.
Shareholders are the owners of the corporation, and they elect the Board of Directors. The directors, in unison, oversee and direct corporation affairs and make business decisions. They employ officers who carry out the Board of Directors’ decisions. Officers are responsible for the day-to-day operations of the company. An officer can be terminated by the Board of Directors at any time. Oregon requirements state that there should be as many officers as stated in the bylaws, but a minimum of one. One person may hold multiple offices. If there are multiple officers, one officer is responsible for maintaining all corporate records.
Appoint Corporate Officers
Shareholders and directors only have the ability to make decisions as part of a group, after holding group meetings and taking votes. An individual shareholder or director does not have the power to do anything - if there are multiple shareholders and directors.
Issue Stock to your Shareholders
One of the benefits of having an S-Corporation is being able to issue shares of stock to raise funds for your business. Shares represent the amount of money invested by the shareholders in the company. Issuing stock to your shareholders allows you to finance your business without relying on debt. Unlike taking out a business loan, you do not pay interest that eats at your profits each month. The value of your business assets can be assessed by taking a look at what amount of your business assets are owned by shareholders vs. lenders. Corporations that have a higher proportion of the company owned by lenders makes an investment in the business appear riskier. If shareholders do invest in your business and purchase stock, keep in mind that if your business fails, you would have to pay back your loans and shareholders.
While there are many advantages to issuing stock, keep in mind that shareholders have an ownership stake in the company. This means that they have certain rights, such as the ability to participate in voting and the assurance that they will be collecting dividends. Profits will be shared and decisions will have to be made in unison. The more stock you issue to shareholders, the smaller your ownership in the business (and the less of a say you have in business major business decisions). On the plus side, when your business grows, you can buy out the other shareholders and get your ownership back.
Issuing stock is not a requirement for S-Corporations, but a privilege that you can make use of if you choose. Doing so can help you fund your business if you are growing and have large, expensive projects planned in the near future. In that case, you can decide how much capital you need and figure out how many shares you’d like to issue and at what price per share. You will already have a number for how many shares you have to offer (that was decided when you filed your Articles of Incorporation). To properly assess the accurate value of each share, determine your company’s net worth first. This will help you figure out what percentage of ownership you believe each share is worth.
Typically, appointed Board of Directors can issue stock whenever and to whomever, as long as the recipient has a brokerage account and is over 18 years old. But within an S-Corp, there are a few more limitations that a C-Corp does not have. While C-Corporations can be owned by any individual or legal entity--foreign or domestic--S-Corporations can only be owned by United States citizens or resident aliens. On top of that, an S-Corp does not allow an unlimited number of shareholders. It maxes out at 100. Also, S-Corps are not permitted to be owned by a C-Corp, another S-Corp, an LLC, a partnership, or many trusts. Lastly, unlike in a C-Corp where shareholders have the option between different stock classes (common, preferred, income, value, growth), an S-Corp only permits one stock class (common).
Another thing that can limit you here is if you’ve chosen to classify your S-Corp as a private corporation. This is typically a smaller corporation where the stock isn't offered to the public. A publiC-Corporation is authorized to sell their stock to the public, while a private company can’t trade its share on public stock exchanges. But a private corporation is not always small. Many big companies are privately held--such as Dell, Koch Industries, Deloitte, and Cargill. It can be harder for private corporations to raise funds, but it can be important in order to maintain family ownership.
Whoever your corporation may sell stock to, it’s important to have a shareholder agreement for protection. This would explain the shareholder’s rights and voting power within the S-Corporation. You will want to decide and let you shareholders know what kind of say they have in the organization or management of the company when they are issued stock. Oregon requires an annual shareholder meeting.
Issue Stock to your Shareholders
One of the benefits of having an S-Corporation is being able to issue shares of stock to raise funds for your business. Shares represent the amount of money invested by the shareholders in the company. Issuing stock to your shareholders allows you to finance your business without relying on debt.
Familiarize Yourself with the
State’s Taxes and Licenses
Income from pass-through entities, such as an Oregon Limited Liability Company and Oregon S-Corp, “passes through” the business to the owners, who are required to report this information on their personal tax returns. In that case, each individual S-Corp member would then have to pay taxes on his or her share of the S-Corp’s income. The S-Corp itself does not pay federal income taxes. Oregon has four different income tax rates, ranging from 5% to 9.9%.
Choosing to classify your business as an S-Corp instead of an LLC will save you on self-employment taxes. But first, you should ensure that your Oregon S-Corp’s net income is approximately $70,000 per year (per member). At this net income level, the costs of maintaining the Oregon S-Corporation will still prove beneficial when you avoid paying LLC self-employment taxes.
There are also other various taxes that an Oregon business may have to pay. For example, employers owe payroll tax on their employees’ wages. Good news for prospective business owners in Oregon: the state of Oregon does not have a sales tax. More Oregon tax info can be found on the Oregon Business Xpress website.
In addition, there may be extra fees for certain insurances, permits, and licenses, depending on the state’s laws and the type of business you own. For example, you may need worker’s compensation, unemployment insurance, building permits, etc. Most Oregon permits and licenses can be found here. Find out the requirements for S-Corps 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
Income from pass-through entities, such as an Oregon Limited Liability Company and Oregon S-Corp, “passes through” the business to the owners, who are required to report this information on their personal tax returns. In that case, each individual S-Corp member would then have to pay taxes on his or her share of the S-Corp’s income.
File an Annual Report
Like most states, the State of Oregon requires all S-Corp owners to file a report that updates all the information that the Oregon Secretary of State (SOS) has on file. This is called an Annual Report and it is due every year, with the initial report due the year following the year of formation of your Oregon S-Corp. A fee of $100 payable to the Oregon Secretary of State Business Registry must accompany the form. You can file online on the Oregon SOS website. Filing this form is necessary for maintaining an active business status. Not filing the report or paying the fee will result in being presented an Oregon S-Corp dissolution form, after which the state will dissolve your business.
Filing a Decennial Report is necessary for maintaining an active status after starting an S-Corp in PA. Not filing the report or paying the fee will result in being presented a Oregon C-Corp dissolution form, after which the state will dissolve your business.
The report can be rather complex–requiring the deciphering of gross receipts, dividends, interest, losses, and all Oregon S-Corp fees–and 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.
File an Annual Report
Like most states, the State of Oregon requires all S-Corp owners to file a report that updates all the information that the Oregon Secretary of State (SOS) has on file. This is called an Annual Report and it is due every year, with the initial report due the year following the year of formation of your Oregon S-Corp.
Raise Funds for Your S-Corp
You can’t start a business with zero capital. There are legal fees, document filing fees, taxes, employees to pay, as well as the costs of operating a business. Some of the most commonly-used options for obtaining funding for your S-Corp 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
- Issuing stock to shareholders
Many new S-Corporation 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 people to your team. S-Corporations may have a single person as the company's owner, or an unlimited number of shareholders participating in the ownership of the business. 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 bylaws and ensure that you are still the primary owner of your Oregon S-Corporation.
Raise Funds for Your S-Corp
You can’t start a business with zero capital. There are legal fees, document filing fees, taxes, employees to pay, as well as the costs of operating a business.
Create a Business Website
Creating a website for your Oregon 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 S-Corp 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.
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 Oregon corp name tips:
- Follow S-Corp naming guidelines. A corporation’s name usually has to include words, like Corporation, Incorporated, Company, or Limited; or abbreviations, like Corp., Inc., Co., or Ltd. 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 getting an S-Corp in Oregon you will need an original name that is not in use by another corporation. To check if a name has already been taken, you can search the Oregon Business Name Availability Check Database.
- Make sure it is available as a web domain. This way, you can find out if another company outside of Oregon has a corporation 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
Once you become an official S-Corporation in the state of Oregon, make sure you keep your S-Corp compliant. Remember all important dates and make all necessary payments on time. Know all of the laws regarding the issuing of stocks. Host all necessary annual meetings. This is mandatory if you don’t want your new business to run into any issues. 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.
Next, make sure you’ve obtained all necessary permits, licenses, and insurances that your OR corp might need—and you’re good to go! Begin operating your Oregon business with peace of mind, knowing that you are protected by an S-Corp in case anything unforeseeable affects your new business venture.
Begin Operating Your Business
Once you become an official S-Corporation in the state of Oregon, make sure you keep your S-Corp compliant. Remember all important dates and make all necessary payments on time. Know all of the laws regarding the issuing of stocks. Host all necessary annual meetings.
Oklahoma S-Corp
Learn the Benefits of an S-Corp
When you decide to start a business, there are a number of business entities to choose from. Each has its own advantages and disadvantages, which we will introduce to you here. Prospective business owners should consult with professionals, such as a business attorney and accountants, before making the final decision. But educating yourself about the different types of corporations can help you assess what is the right business structure for you beforehand.
But first, are you ready to incorporate? It is advised that you should incorporate when you anticipate taking investments or when your business approaches material size or complexity.
Typically, “material size” means a business with revenue above $100,000. Once you know you’re ready, you have the option between choosing to classify your business as a C-Corporation or an S-Corporation. While S-Corps used to be the way to go for small businesses (it’s even been nicknamed the “Small BusinesS-Corporation”), thanks to the 2017 Tax Cuts and Jobs Act, C-Corps may now offer lower corporate tax rates to smaller business. Now, S-Corps are sometimes advisable for larger businesses. But keep in mind that C-Corps give you more options to expand and raise money, which can be very beneficial to a larger business. You may want to discuss the differences with a financial advisor or lawyer who can help break down all of the costs to help you assess what will work best for you.
Whether you choose to structure your business entity as a C or S-Corporation will determine how much you’ll pay in taxes, the ways you’re permitted to raise money, and the ease with which you can expand as your business grows. The standard and most common type of corporation is a C-Corporation. In fact, a C-Corp is the default type of corporation, and all S-Corps begin as a C-Corp or LLC. When you initially incorporate, your company will automatically become a standard C-Corp, and only after you file multiple forms can you transition to an S-Corp for federal tax purposes.
If there is an issue with a product, an S-Corp protects you. Compensation can only be taken from the S-Corp’s assets, not your personal assets.
Start Your S-Corp NowHow do you know which type of corporation you want to register your business as when they are both so similar? Both types of corporations offer owners protection from individual liability, so shareholders (and directors, officers, and employees) are typically not personally responsible for business debts. C-Corps and S-Corps require similar paperwork. In addition, both are owned by shareholders, have a Board of Directors with annual meetings, and are managed by executive officers. It is also a requirement that both types of corporations pay annual fees, set up bylaws, and issue stock. Basically, an S-Corporation is the legal equivalent of a regular C-Corporation. Both have the same rights. They just pays taxes differently.
But why opt for an S-Corp? What are the benefits of setting up your Oklahoma business as an S-Corp?
The main difference between a C and S-Corporation is that an S-Corp is not treated as a disregarded entity. It is a pass-through tax entity. While a C-Corp’s tax attributes are determined at the entity level, an S-Corp determines its own income, deductions, credits, etc. It spreads out the tax attributes among its owners (or to its sole owner) as part of shared ownership. Likewise, within an S-Corporation, the profits are passed on to the shareholders, who are then taxed based on their personal returns. Unlike a C-Corporation, an S-Corporation is required to file an annual information tax return. A few other differences are that S-Corps must have no more than 100 shareholders (all individuals, not corporations), have only one class of stock, and be owned by U.S. citizens or resident aliens.
There are advantages to setting up your business as a Oklahoma S-Corp. Registering as an S-Corporation offers you:
- The ability to operate as a corporation even if the owner leaves the company or passes away.
- Pass-through taxation, as owners report their share of the profits and losses on their individual tax returns.
- A way out of being taxed twice, the way you would be in a C-Corporation. There is no double taxation occurring--once as income and again as dividend income. You save more money!
- The opportunity to issue shares of stock to increase the value of your business.
- A deduction of 20% of all S-Corp income on your personal tax return, which can significantly reduce your tax burden.
- The ability to write off the S-Corp’s losses on shareholders’ individual tax returns.
- Annual tax filing requirements, unlike C-Corps which must file every quarter.
- Corporate status, which means shareholders, directors, and officers are protected from sharing liability as long as there is no evidence of fraud or other misdeeds
But there are a few disadvantages to starting an S-Corp. One of those is the fact that, unlike a C-Corp, there are restrictions on ownership if you create a Oklahoma S-Corp. S-Corporations can only be owned by United States citizens or resident aliens. Additionally, an S-Corp permits only 100 shareholders, while for a C-Corp, there is no limit. But overall, the benefits far outweigh the setbacks, and an S-Corporation is an excellent choice for many entrepreneurs looking to start a business in Oklahoma.
Learn the Benefits of an S-Corp
Educating yourself about the different types of corporations can help you assess what is the right business structure for you. It is advised that you should incorporate when you anticipate taking investments or when your business approaches material size or complexity.
Decide on a Registered Agent
Next, figure out who the Registered Agent for your S-Corp should be. The State of Oklahoma requires every S-Corporation in the state to have one. This enables the state to ensure the delivery of legal mail and that court documents can be tracked appropriately. The Registered Agent will also act as the contact point between your S-Corp and the Secretary of State’s office. Once you assign someone as your Registered Agent, they can receive official correspondence and documents on behalf of your business.
A Registered Agent can be either an individual who is a resident of Oklahoma 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. Your Registered Agent’s information would go on your most important corporation forms.
- Possess a physical street address located in Oklahoma (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 Oklahoma Registered 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 Oklahoma state 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. An alternative you can look into is hiring a Oklahoma Commercial Registered Agent Service. We also offer a Registered Agent Service for a small charge that you can include as an add-on to your shopping cart.
Decide on a Registered Agent
Next, figure out who the Registered Agent for your S-Corp should be. The State of Oklahoma requires every S-Corporation in the state to have one.
Submit Your Articles of Incorporation
To create an S-Corp in Oklahoma, you will also need to register your business by filling out and submitting the Certificate of Incorporation--usually called the Articles of Incorporation in most other states. The Certificate of Incorporation is a form that should be filed (and maintained) with the state of Oklahoma. It establishes the basic elements of the corporation, such as the name and address of the corporation, the number and classes of stock, and certain indemnification provisions. Prior to filing, the Certificate of Incorporation must be signed by each incorporator in order to authenticate it. The document can be repealed or amended with the approval of the Board of Directors.
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 S-Corp 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 Oklahoma Articles of Incorporation form is accepted, congratulations! Your company now exists as a recognized legal entity that is authorized to conduct business within the State of Oklahoma.
Submit Your Articles of Incorporation
To create an S-Corp in Oklahoma, you will also need to register your business by filling out and submitting the Certificate of Incorporation--usually called the Articles of Incorporation in most other states. The Certificate of Incorporation is a form that should be filed (and maintained) with the state of Oklahoma.
Obtain an Employer
Identification Number
Next, your S-Corp 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. All corporations require an EIN, even if you don’t have any employees.
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 apply 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.
If you know your S-Corp 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.
Obtain an Employer Identification Number
Next, your S-Corp 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. All corporations require an EIN, even if you don’t have any employees.
Draft Your Corporate Bylaws
First, what are bylaws? If you’ve heard of an Operating Agreement, this is just like that, but “bylaws” is the term usually used when referring to a corporation. There is no set criteria for what your bylaws should look like, but typically, they should set forth internal rules and procedures for your S-Corporation. Basically, bylaws are rules of operation that create the company’s structure, ensuring that employees, shareholders, and executives are in the loop about how the business will be run.
Key points are covered in the corporate bylaws document, such as when annual meetings will be held, the size of your Board of Directors, and how this form will be amended if need be. In addition, member duties are explained and solutions to common disputes between parties are offered. Voting rights and salaries are discussed, and “what if” scenarios are presented. Having bylaws allows you to set up a structure that works for your business’s unique needs instead of adhering to default regulations within the state.
While bylaws are not required in some states, they are required in Oklahoma. It is important to establish a set of bylaws that ensure your business runs smoothly. Filling out and filing this document prior to starting an S-Corporation in Oklahoma provides protection for your business.
You can use this corporate bylaws generator to get a sense of what goes into a typical set of bylaws. To ensure it is done correctly, you can have a lawyer look over your bylaws prior to submission to ensure all necessary rules and scenarios are covered. Get legal advice from our partner Rocket Lawyer.
Draft Your Corporate Bylaws
First, what are bylaws? If you’ve heard of an Operating Agreement, this is just like that, but “bylaws” is the term usually used when referring to a corporation. There is no set criteria for what your bylaws should look like, but typically, they should set forth internal rules and procedures for your S-Corporation.
Elect a Board of Directors
Oklahoma law requires one or more director(s). The Board of Directors, while they are not involved in the daily tasks of running a business, represent or govern the corporation. Their duties include handling finances and fulfilling legal requirements, as well as determining the mission of the company.
People who do not work for your company can be a part of your Board of Directors. In fact, many businesses turn to lawyers or other business owners to fill in a spot on their Board of Directors. That way, they receive outside expertise from them, plus they may come with their own additional business contacts.
These board members must adhere to something called “the duty of loyalty,” which means that directors and officers of an S-Corporation can only make decisions without any personal economic conflict. The duty of loyalty is breached if something like a self-interested transaction occurs or a business opportunity is stolen. Plus, there is also the “duty of care” to consider. Members of the Board of Directors must make decisions that are in the best interests of the corporation at all times. For example, making a decision that causes serious losses for the shareholders would mean they are in violation of their duty of care--and they can be sued for this.
Your board members will have to hold meetings to make important decisions, such as issuing shares or amending something in the Certificate of Incorporation. The Board of Directors typically receives equal voting rights (some states, like Delaware, are an exception) when making these decisions. During the first meeting of the S-Corporation's Board of Directors, directors can appoint officers, decide on bylaws, select a corporate bank, and more. All subsequent meetings must be held annually, though, of course, if more are needed, more can be held.
Minutes of the meeting, which is the recorded documentation of what was discussed or what happened during a meeting, must be recorded to exhibit transparency in business operations, but they do not need to be filed with the state. Instead, these should be kept with your other corporate records, such as the Certificate of Incorporation and bylaws. These documents should be saved for at least seven years in order to protect your company.
Elect a Board of Directors
First, familiarize yourself with the roles within an S-Corporation. There are three groups:
- Shareholders
- Board of Directors
- Officers
Appoint Corporate Officers
Shareholders and directors only have the ability to make decisions as part of a group, after holding group meetings and taking votes. An individual shareholder or director does not have the power to do anything--if there are multiple shareholders and directors. If a corporation has only one shareholder or director, the decision-making, of course, falls on that person without the need for a group meeting. Officers, on the other hand, do not operate in groups. An officer holding the position of president, chief executive officer, or treasurer, for example, is an agent of the corporation and has the authority to act on behalf of the corporation on his or her own. Within smaller S-Corps, directors are sometimes also officers and shareholders. In that case, even though the same person is serving in multiple roles, each role has very different responsibilities and is treated as such.
Shareholders are the owners of the corporation, and they elect the Board of Directors. The directors, in unison, oversee and direct corporation affairs and make business decisions. They employ officers who carry out the Board of Directors’ decisions. Officers are responsible for the day-to-day operations of the company. An officer can be terminated by the Board of Directors at any time.
Oklahoma requirements state that there should be as many officers as stated in the bylaws--but at least a minimum of one. One person may hold multiple offices. If there are multiple officers, one officer is responsible for maintaining all corporate records.
Appoint Corporate Officers
Shareholders and directors only have the ability to make decisions as part of a group, after holding group meetings and taking votes. An individual shareholder or director does not have the power to do anything - if there are multiple shareholders and directors.
Issue Stock to your Shareholders
One of the benefits of having an Oklahoma S-Corporation is being able to issue shares of stock to raise funds for your business. Shares represent the amount of money invested by the shareholders in the company. Issuing stock to your shareholders allows you to finance your business without relying on debt. Unlike taking out a business loan, you do not pay interest that eats at your profits each month. The value of your business assets can be assessed by taking a look at what amount of your business assets are owned by shareholders vs. lenders. Corporations that have a higher proportion of the company owned by lenders makes an investment in the business appear riskier. If shareholders do invest in your business and purchase stock, keep in mind that if your business fails, you would have to pay back your loans and shareholders.
While there are many advantages to issuing stock, keep in mind that shareholders have an ownership stake in the company. This means that they have certain rights, such as the ability to participate in voting and the assurance that they will be collecting dividends. Profits will be shared and decisions will have to be made in unison. The more stock you issue to shareholders, the smaller your ownership in the business (and the less of a say you have in business major business decisions). On the plus side, when your business grows, you can buy out the other shareholders and get your ownership back.
Issuing stock is not a requirement for S-Corporations, but a privilege that you can make use of if you choose. Doing so can help you fund your business if you are growing and have large, expensive projects planned in the near future. In that case, you can decide how much capital you need and figure out how many shares you’d like to issue and at what price per share. You will already have a number for how many shares you have to offer (that was decided when you filed your Articles of Incorporation). To properly assess the accurate value of each share, determine your company’s net worth first. This will help you figure out what percentage of ownership you believe each share is worth.
Typically, appointed Board of Directors can issue stock whenever and to whomever, as long as the recipient has a brokerage account and is over 18 years old. But within an S-Corp, there are a few more limitations that a C-Corp does not have. While C-Corporations can be owned by any individual or legal entity--foreign or domestic--S-Corporations can only be owned by United States citizens or resident aliens. On top of that, an S-Corp does not allow an unlimited number of shareholders. It maxes out at 100. Also, S-Corps are not permitted to be owned by a C-Corp, another S-Corp, an LLC, a partnership, or many trusts. Lastly, unlike in a C-Corp where shareholders have the option between different stock classes (common, preferred, income, value, growth), an S-Corp only permits one stock class (common).
Another thing that can limit you here is if you’ve chosen to classify your S-Corp as a private corporation. This is typically a smaller corporation where the stock isn't offered to the public. A publiC-Corporation is authorized to sell their stock to the public, while a private company can’t trade its share on public stock exchanges. But a private corporation is not always small. Many big companies are privately held--such as Dell, Koch Industries, Deloitte, and Cargill. It can be harder for private corporations to raise funds, but it can be important in order to maintain family ownership.
Whoever your corporation may sell stock to, it’s important to have a shareholder agreement for protection. This would explain the shareholder’s rights and voting power within the S-Corporation. You will want to decide and let you shareholders know what kind of say they have in the organization or management of the company when they are issued stock. Oklahoma requires an annual shareholder meeting--unless directors are elected by written consent.
Issue Stock to your Shareholders
One of the benefits of having a Oklahoma C-Corporation is being able to issue shares of stock to raise funds for your business. Shares represent the amount of money invested by the shareholders in the company. Issuing stock to your shareholders allows you to finance your business without relying on debt.
Familiarize Yourself with the
State’s Taxes and Licenses
A C-Corporation is taxed as a separate entity and must report any profits or losses on a corporate tax return. Shareholders are not taxed on the corporation's profits--they report and pay income taxes only on what they are paid by the corporation. Oklahoma's income tax rate is 5%.
The State of Oklahoma has a corporation income tax of 6% of Oklahoma taxable income. Oklahoma also has a corporation franchise tax that applies specifically to traditional C-Corporations and S-Corporations. The franchise tax’s rate is $1.25 per $1,000. There is a minimum tax of $250 and a maximum tax of $20,000.
There are also other various taxes. For example, Oklahoma has a sales and use tax. Currently, the sales tax rate is 4.5%, but it varies depending on the city or county. The Cleveland County sales tax rate is 0%. The Oklahoma Tax Commission website has more information on Oklahoma taxes.
In addition, there may be extra fees for certain insurances, permits, and licenses, depending on the state’s laws and the type of business you own. Depending on your type of business, you may need worker’s compensation, unemployment insurance, building permits, etc. In Oklahoma, for example, businesses that sell a product or service are required to obtain a sales tax permit from the Oklahoma Tax Commission (OTC) - which gives owners permission to legally collect sales tax. Most Oklahoma licenses and permits can be found here.Plus, the OK Corp Commission also has a detailed list of licenses and license fees. According to their website, the OK Corp Comm is a “regulatory agency for the State of Oklahoma with emphasis on the Fuel, Oil and Gas, Public Utilities, and Transportation Industries.”
Familiarize Yourself with the State’s Taxes and Licenses
A C-Corporation is taxed as a separate entity and must report any profits or losses on a corporate tax return. Shareholders are not taxed on the corporation's profits--they report and pay income taxes only on what they are paid by the corporation. Oklahoma's income tax rate is 5%.
Keep Track of Your Business Financials
While most states require an Annual Report, an Oklahoma corporation doesn’t have 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 Oklahoma corp 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 all taken care of 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
While most states require an Annual Report, an Oklahoma corporation doesn’t have 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 Oklahoma corp fees.
Raise Funds for Your Corporation
You can’t start a business with zero capital. There are legal fees, document filing fees, taxes, employees to pay, as well as the costs of operating a business. Some of the most commonly-used options for obtaining funding for your S-Corp 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
- Issuing stock to shareholders
Many new S-Corporation 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 - such as the Oklahoma Bankers Mortgage Corp. 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 people to your team. S-Corporations may have a single person as the company's owner, or an unlimited number of shareholders participating in the ownership of the business. 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 bylaws and ensure that you are still the primary owner of the S-Corp.
Raise Funds for Your Corporation
You can’t start a business with zero capital. There are legal fees, document filing fees, taxes, employees to pay, as well as the costs 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 S-Corp 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.
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 Oklahoma corporation name tips:
- Follow S-Corp naming guidelines. A corporation’s name usually has to include words, like Corporation, Incorporated, Company, or Limited; or abbreviations, like Corp., Inc., Co., or Ltd. 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 getting an S-Corp in Oklahoma you will need an original name that is not in use by another corporation. To check if a name has already been taken, you can search the Oklahoma Name Availability Database.
- Make sure it is available as a web domain. This way, you can find out if another company outside of Oklahoma has a corporation 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
Once you become an official S-Corporation in the state of Oklahoma, make sure you keep your S-Corp compliant. Remember all important dates and make all necessary payments on time. Know all of the laws regarding the issuing of stocks. Host all necessary annual meetings. This is mandatory if you don’t want your new business to run into any issues. 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.
Next, make sure you’ve obtained all necessary permits, licenses, and insurances that your OK corp might need - and you’re good to go! Begin operating your Oklahoma business with peace of mind, knowing that you are protected by an S-Corp in case anything unforeseeable affects your new business venture.
Begin Operating Your Business
Once you become an official S-Corporation in the state of Oklahoma, make sure you keep your S-Corp compliant. Remember all important dates and make all necessary payments on time. Know all of the laws regarding the issuing of stocks. Host all necessary annual meetings.
Ohio S-Corp
Learn the Benefits of an S-Corp
When you decide to start a business, there are a number of business entities to choose from. Each has its own advantages and disadvantages, which we will introduce to you here. Prospective business owners should consult with professionals, such as a business attorney and accountants, before making the final decision. But educating yourself about the different types of corporations can help you assess what is the right business structure for you beforehand.
But first, are you ready to incorporate? It is advised that you should incorporate when you anticipate taking investments or when your business approaches material size or complexity.
Typically, “material size” means a business with revenue above $100,000. Once you know you’re ready, you have the option between choosing to classify your business as a C-Corporation or an S-Corporation. While S-Corps used to be the way to go for small businesses (it’s even been nicknamed the “Small BusinesS-Corporation”), thanks to the 2017 Tax Cuts and Jobs Act, C-Corps may now offer lower corporate tax rates to smaller business. Now, S-Corps are sometimes advisable for larger businesses. But keep in mind that C-Corps give you more options to expand and raise money, which can be very beneficial to a larger business. You may want to discuss the differences with a financial advisor or lawyer who can help break down all of the costs to help you assess what will work best for you.
Whether you choose to structure your business entity as a C or S-Corporation will determine how much you’ll pay in taxes, the ways you’re permitted to raise money, and the ease with which you can expand as your business grows. The standard and most common type of corporation is a C-Corporation. In fact, a C-Corp is the default type of corporation, and all S-Corps begin as a C-Corp or LLC. When you initially incorporate, your company will automatically become a standard C-Corp, and only after you file multiple forms can you transition to an S-Corp for federal tax purposes.
If there is an issue with a product, an S-Corp protects you. Compensation can only be taken from the S-Corp’s assets, not your personal assets.
Start Your S-Corp NowHow do you know which type of corporation you want to register your business as when they are both so similar? Both types of corporations offer owners protection from individual liability, so shareholders (and directors, officers, and employees) are typically not personally responsible for business debts. C-Corps and S-Corps require similar paperwork. In addition, both are owned by shareholders, have a Board of Directors with annual meetings, and are managed by executive officers. It is also a requirement that both types of corporations pay annual fees, set up bylaws, and issue stock. Basically, an S-Corporation is the legal equivalent of a regular C-Corporation. Both have the same rights. They just pays taxes differently.
But why opt for an S-Corp? What are the benefits of setting up your state of Ohio business as an S-Corp?
The main difference between a C and S-Corporation is that an S-Corp is not treated as a disregarded entity. It is a pass-through tax entity. While a C-Corp’s tax attributes are determined at the entity level, an S-Corp determines its own income, deductions, credits, etc. It spreads out the tax attributes among its owners (or to its sole owner) as part of shared ownership. Likewise, within an S-Corporation, the profits are passed on to the shareholders, who are then taxed based on their personal returns. Unlike a C-Corporation, an S-Corporation is required to file an annual information tax return. A few other differences are that S-Corps must have no more than 100 shareholders (all individuals, not corporations), have only one class of stock, and be owned by U.S. citizens or resident aliens.
There are advantages to establishing an S-Corp in Ohio. Registering as an S-Corporation offers you:
- The ability to operate as a corporation even if the owner leaves the company or passes away.
- Pass-through taxation, as owners report their share of the profits and losses on their individual tax returns.
- A way out of being taxed twice, the way you would be in a C-Corporation. There is no double taxation occurring--once as income and again as dividend income. You save more money!
- The opportunity to issue shares of stock to increase the value of your business.
- A deduction of 20% of all S-Corp income on your personal tax return, which can significantly reduce your tax burden.
- The ability to write off the S-Corp’s losses on shareholders’ individual tax returns.
- Annual tax filing requirements, unlike C-Corps which must file every quarter.
- Corporate status, which means shareholders, directors, and officers are protected from sharing liability as long as there is no evidence of fraud or other misdeeds
But there are a few disadvantages to starting an S-Corp. One of those is the fact that, unlike a C-Corp, there are restrictions on ownership if you start a Ohio S-Corp. S-Corporations can only be owned by United States citizens or resident aliens. Additionally, an S-Corp permits only 100 shareholders, while for a C-Corp, there is no limit. But overall, the benefits far outweigh the setbacks, and an S-Corporation is an excellent choice for many entrepreneurs looking to start a business in Ohio.
Learn the Benefits of an S-Corp
Educating yourself about the different types of corporations can help you assess what is the right business structure for you. It is advised that you should incorporate when you anticipate taking investments or when your business approaches material size or complexity.
Decide on a Registered Agent
Next, figure out who the Registered Agent for the corporation should be. The State of Ohio requires every corporation in the state to have one. This enables the state to ensure the delivery of legal mail and that court documents can be tracked appropriately. The Registered Agent will also act as the contact point between the Ohio Secretary of State and the corporation. Once you assign someone as your Registered Agent, they can receive official correspondence and documents on behalf of your business.
A Registered Agent can be either an individual who is a resident of Ohio 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. Your Registered Agent’s information would go on your most important Ohio Secretary of State corporation forms.
- Possess a physical street address located in Ohio (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 Ohio Registered 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 Ohio state 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. An alternative you can look into is hiring a Ohio Commercial Registered Agent Service. We also offer a Registered Agent Service for a small charge that you can include as an add-on to your shopping cart.
Decide on a Registered Agent
Next, figure out who the Registered Agent for the corporation should be. The State of Ohio requires every corporation in the state to have one.
Obtain an Employer
Identification Number
Next, your S-Corp 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. All corporations require an EIN, even if you don’t have any employees.
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 apply 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.
If you know your S-Corp 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.
Obtain an Employer Identification Number
Next, your S-Corp 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. All corporations require an EIN, even if you don’t have any employees.
Submit Your Articles
of Incorporation
To create an S-Corp in Ohio, you will also need to register your business by filling out and submitting the Articles of Incorporation. The Articles of Incorporation is a form that should be filed (and maintained) with the state of Ohio. It establishes the basic elements of the corporation, such as the name and address of the corporation, the number and classes of stock, and certain indemnification provisions. Prior to filing, the Articles of Incorporation must be signed by each incorporator in order to authenticate it. The document can be repealed or amended with the approval of the Board of Directors.
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 S-Corp 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 Ohio Articles of Incorporation form is accepted, congratulations! Your company now exists as a recognized legal entity that is authorized to conduct business within the State of Ohio.
Submit Your Articles of Incorporation
To create an S-Corp in Ohio, you will also need to register your business by filling out and submitting the Articles of Incorporation. The Articles of Incorporation is a form that should be filed (and maintained) with the state of Ohio.
Draft Your Corporate Bylaws
First, what are bylaws? If you’ve heard of an Operating Agreement, this is just like that, but “bylaws” is the term usually used when referring to a corporation. There is no set criteria for what your bylaws should look like, but typically, they should set forth internal rules and procedures for your OH S-Corp. Basically, bylaws are rules of operation that create the company’s structure, ensuring that employees, shareholders, and executives are in the loop about how the business will be run.
Key points are covered in the corporate bylaws document, such as when annual meetings will be held, the size of your Board of Directors, and how this form will be amended if need be. In addition, member duties are explained and solutions to common disputes between parties are offered. Voting rights and salaries are discussed, and “what if” scenarios are presented. Having bylaws allows you to set up a structure that works for your business’s unique needs instead of adhering to default regulations within the state.
While bylaws are required in some states, they are not required in Ohio. Nevertheless, it is important to establish a set of bylaws that ensure your business runs smoothly. Filling out and filing this document prior to starting an S-Corporation in Ohio provides protection for your business.
You can use this corporate bylaws generator to get a sense of what goes into a typical set of bylaws. To ensure it is done correctly, you can have a lawyer look over your bylaws prior to submission to ensure all necessary rules and scenarios are covered. Get legal advice from our partner Rocket Lawyer.
Draft Your Corporate Bylaws
First, what are bylaws? If you’ve heard of an Operating Agreement, this is just like that, but “bylaws” is the term usually used when referring to a corporation. There is no set criteria for what your bylaws should look like, but typically, they should set forth internal rules and procedures for your OR S-Corp.
Elect a Board of Directors
Ohio law requires one or more director(s). The Board of Directors, while they are not involved in the daily tasks of running a business, represent or govern the corporation. Their duties include handling finances and fulfilling legal requirements, as well as determining the mission of the company.
People who do not work for your company can be a part of your Board of Directors. In fact, many businesses turn to lawyers or other business owners to fill in a spot on their Board of Directors. That way, they receive outside expertise from them, plus they may come with their own additional business contacts.
These board members must adhere to something called “the duty of loyalty,” which means that directors and officers of an S-Corporation can only make decisions without any personal economic conflict. The duty of loyalty is breached if something like a self-interested transaction occurs or a business opportunity is stolen. Plus, there is also the “duty of care” to consider. Members of the Board of Directors must make decisions that are in the best interests of the corporation at all times. For example, making a decision that causes serious losses for the shareholders would mean they are in violation of their duty of care--and they can be sued for this.
Your board members will have to hold meetings to make important decisions, such as issuing shares or amending something in the Articles of Incorporation. The Board of Directors typically receives equal voting rights (some states, like Delaware, are an exception) when making these decisions. During the first meeting of the S-Corporation's Board of Directors, directors can appoint officers, decide on bylaws, select a corporate bank, and more. All subsequent meetings must be held annually, though, of course, if more are needed, more can be held.
Minutes of the meeting, which is the recorded documentation of what was discussed or what happened during a meeting, must be recorded to exhibit transparency in business operations, but they do not need to be filed with the state. Instead, these should be kept with your other corporate records, such as Articles of Incorporation and bylaws. These documents should be saved for at least seven years in order to protect your company.
Elect a Board of Directors
First, familiarize yourself with the roles within an S-Corporation. There are three groups:
- Shareholders
- Board of Directors
- Officers
Appoint Corporate Officers
Shareholders and directors only have the ability to make decisions as part of a group, after holding group meetings and taking votes. An individual shareholder or director does not have the power to do anything -if there are multiple shareholders and directors. If a corporation has only one shareholder or director, the decision-making, of course, falls on that person without the need for a group meeting. Officers, on the other hand, do not operate in groups. An officer holding the position of president, chief executive officer, or treasurer, for example, is an agent of the corporation and has the authority to act on behalf of the corporation on his or her own. Within smaller S-Corps, directors are sometimes also officers and shareholders. In that case, even though the same person is serving in multiple roles, each role has very different responsibilities and is treated as such.
Shareholders are the owners of the corporation, and they elect the Board of Directors. The directors, in unison, oversee and direct corporation affairs and make business decisions. They employ officers who carry out the Board of Directors’ decisions. Officers are responsible for the day-to-day operations of the company. An officer can be terminated by the Board of Directors at any time. Ohio requirements state that there should be a President, Secretary, and Treasurer.
Appoint Corporate Officers
Shareholders and directors only have the ability to make decisions as part of a group, after holding group meetings and taking votes. An individual shareholder or director does not have the power to do anything - if there are multiple shareholders and directors.
Issue Stock to your Shareholders
One of the benefits of having an S-Corporation is being able to issue shares of stock to raise funds for your business. Shares represent the amount of money invested by the shareholders in the company. Issuing stock to your shareholders allows you to finance your business without relying on debt. Unlike taking out a business loan, you do not pay interest that eats at your profits each month. The value of your business assets can be assessed by taking a look at what amount of your business assets are owned by shareholders vs. lenders. Corporations that have a higher proportion of the company owned by lenders makes an investment in the business appear riskier. If shareholders do invest in your business and purchase stock, keep in mind that if your business fails, you would have to pay back your loans and shareholders.
While there are many advantages to issuing stock, keep in mind that shareholders have an ownership stake in the company. This means that they have certain rights, such as the ability to participate in voting and the assurance that they will be collecting dividends. Profits will be shared and decisions will have to be made in unison. The more stock you issue to shareholders, the smaller your ownership in the business (and the less of a say you have in business major business decisions). On the plus side, when your business grows, you can buy out the other shareholders and get your ownership back.
Issuing stock is not a requirement for S-Corporations, but a privilege that you can make use of if you choose. Doing so can help you fund your business if you are growing and have large, expensive projects planned in the near future. In that case, you can decide how much capital you need and figure out how many shares you’d like to issue and at what price per share. You will already have a number for how many shares you have to offer (that was decided when you filed your Articles of Incorporation). To properly assess the accurate value of each share, determine your company’s net worth first. This will help you figure out what percentage of ownership you believe each share is worth.
Typically, appointed Board of Directors can issue stock whenever and to whomever, as long as the recipient has a brokerage account and is over 18 years old. But within an S-Corp, there are a few more limitations that a C-Corp does not have. While C-Corporations can be owned by any individual or legal entity--foreign or domestic--S-Corporations can only be owned by United States citizens or resident aliens. On top of that, an S-Corp does not allow an unlimited number of shareholders. It maxes out at 100. Also, S-Corps are not permitted to be owned by a C-Corp, another S-Corp, an LLC, a partnership, or many trusts. Lastly, unlike in a C-Corp where shareholders have the option between different stock classes (common, preferred, income, value, growth), an S-Corp only permits one stock class (common).
Another thing that can limit you here is if you’ve chosen to classify your S-Corp as a private corporation. This is typically a smaller corporation where the stock isn't offered to the public. A publiC-Corporation is authorized to sell their stock to the public, while a private company can’t trade its share on public stock exchanges. But a private corporation is not always small. Many big companies are privately held--such as Dell, Koch Industries, Deloitte, and Cargill. It can be harder for private corporations to raise funds, but it can be important in order to maintain family ownership.
Whoever your corporation may sell stock to, it’s important to have a shareholder agreement for protection. This would explain the shareholder’s rights and voting power within the S-Corporation. You will want to decide and let you shareholders know what kind of say they have in the organization or management of the company when they are issued stock. Ohio does not require an annual shareholder meeting.
Issue Stock to your Shareholders
One of the benefits of having an S-Corporation is being able to issue shares of stock to raise funds for your business. Shares represent the amount of money invested by the shareholders in the company. Issuing stock to your shareholders allows you to finance your business without relying on debt.
Familiarize Yourself with the
State’s Taxes and Licenses
Income from pass-through entities, such as an Ohio limited liability company (LLC) and an S-Corporation, “passes through” the business to the owners, who are required to report this information on their personal tax returns. Each individual S-Corp member will then have to pay taxes on his or her share of the S-Corp’s income. The S-Corp itself does not pay federal income taxes. Ohio’s income tax range from 0% to 4.997%. Ohio’s state tax rates vary between 1.98% and 5%.
Additionally, some OH corps pay Ohio sales tax on products, employers owe payroll tax on employees wages, and employees pay federal, state and payroll tax on their earnings. For more details on Ohio state taxes, visit the Ohio Department of Taxation. It is possible to open an LLC and file taxes as an S-Corp to help reduce the amount of self-employment tax.
There may be extra fees for certain insurances, permits, and licenses. For example, depending on the state’s laws and the type of business you own, you may need to pay unemployment tax and offer worker’s compensation insurance. Info on on worker’s comp can be found on the Ohio Bureau of Workers' Compensation website. Find out the specific requirements for S-Corps 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
Income from pass-through entities, such as an Ohio limited liability company (LLC) and an S-Corporation, “passes through” the business to the owners, who are required to report this information on their personal tax returns. Each individual S-Corp member will then have to pay taxes on his or her share of the S-Corp’s income.
Keep Track of Your Business Financials
While most states require an Annual Report, an Ohio S-Corporation doesn’t have 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 Ohio corp 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 all taken care of 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
While most states require an Annual Report, an Ohio S-Corporation doesn’t have 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 Ohio corp fees.
Raise Funds for Your S-Corp
You can’t start a business with zero capital. There are legal fees, document filing fees, taxes, employees to pay, as well as the costs of operating a business. Some of the most commonly-used options for obtaining funding for your S-Corp 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
- Issuing stock to shareholders
Many new S-Corporation 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 people to your team. S-Corporations may have a single person as the company's owner, or an unlimited number of shareholders participating in the ownership of the business. 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 bylaws and ensure that you are still the primary owner of your Ohio S-Corporation.
Raise Funds for Your S-Corp
You can’t start a business with zero capital. There are legal fees, document filing fees, taxes, employees to pay, as well as the costs of operating a business.
Create a Business Website
Creating a website for your Ohio 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 S-Corp 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.
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 Ohio corp name tips:
- Follow S-Corp naming guidelines. A corporation’s name usually has to include words, like Corporation, Incorporated, Company, or Limited; or abbreviations, like Corp., Inc., Co., or Ltd. 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 getting an S-Corp in Ohio you will need an original name that is not in use by another corporation. To check if a name has already been taken, you can search the Ohio Name Database.
- Make sure it is available as a web domain. This way, you can find out if another company outside of Ohio has a corporation 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
Once you become an official S-Corporation in the state of Ohio, make sure you keep your S-Corp compliant. Remember all important dates and make all necessary payments on time. Know all of the laws regarding the issuing of stocks. Host all necessary annual meetings. This is mandatory if you don’t want your new business to run into any issues. 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.
Next, make sure you’ve obtained all necessary permits, licenses, and insurances that your OH corp might need—and you’re good to go! Begin operating your Ohio business with peace of mind, knowing that you are protected by an S-Corp in case anything unforeseeable affects your new business venture.
Begin Operating Your Business
Once you become an official S-Corporation in the state of Ohio, make sure you keep your S-Corp compliant. Remember all important dates and make all necessary payments on time. Know all of the laws regarding the issuing of stocks. Host all necessary annual meetings.
North Dakota S-Corp
Learn the Benefits of an S-Corp
When you decide to start a business, there are a number of business entities to choose from. Each has its own advantages and disadvantages, which we will introduce to you here. Prospective business owners should consult with professionals, such as a business attorney and accountants, before making the final decision. But educating yourself about the different types of corporations can help you assess what is the right business structure for you beforehand.
But first, are you ready to incorporate? It is advised that you should incorporate when you anticipate taking investments or when your business approaches material size or complexity.
Typically, “material size” means a business with revenue above $100,000. Once you know you’re ready, you have the option between choosing to classify your business as a C-Corporation or an S-Corporation. While S-Corps used to be the way to go for small businesses (it’s even been nicknamed the “Small BusinesS-Corporation”), thanks to the 2017 Tax Cuts and Jobs Act, C-Corps may now offer lower corporate tax rates to smaller business. Now, S-Corps are sometimes advisable for larger businesses. But keep in mind that C-Corps give you more options to expand and raise money, which can be very beneficial to a larger business. You may want to discuss the differences with a financial advisor or lawyer who can help break down all of the costs to help you assess what will work best for you.
Whether you choose to structure your business entity as a C or S-Corporation will determine how much you’ll pay in taxes, the ways you’re permitted to raise money, and the ease with which you can expand as your business grows. The standard and most common type of corporation is a C-Corporation. In fact, a C-Corp is the default type of corporation, and all S-Corps begin as a C-Corp or LLC. When you initially incorporate, your company will automatically become a standard C-Corp, and only after you file multiple forms can you transition to an S-Corp for federal tax purposes.
If there is an issue with a product, an S-Corp protects you. Compensation can only be taken from the S-Corp’s assets, not your personal assets.
Start Your S-Corp NowHow do you know which type of corporation you want to register your business as when they are both so similar? Both types of corporations offer owners protection from individual liability, so shareholders (and directors, officers, and employees) are typically not personally responsible for business debts. C-Corps and S-Corps require similar paperwork. In addition, both are owned by shareholders, have a Board of Directors with annual meetings, and are managed by executive officers. It is also a requirement that both types of corporations pay annual fees, set up bylaws, and issue stock. Basically, an S-Corporation is the legal equivalent of a regular C-Corporation. Both have the same rights. They just pays taxes differently.
But why opt for an S-Corp? What are the benefits of setting up your state of North Dakota business as an S-Corp?
The main difference between a C and S-Corporation is that an S-Corp is not treated as a disregarded entity. It is a pass-through tax entity. While a C-Corp’s tax attributes are determined at the entity level, an S-Corp determines its own income, deductions, credits, etc. It spreads out the tax attributes among its owners (or to its sole owner) as part of shared ownership. Likewise, within an S-Corporation, the profits are passed on to the shareholders, who are then taxed based on their personal returns. Unlike a C-Corporation, an S-Corporation is required to file an annual information tax return. A few other differences are that S-Corps must have no more than 100 shareholders (all individuals, not corporations), have only one class of stock, and be owned by U.S. citizens or resident aliens.
There are advantages to establishing an S-Corp in North Dakota. Registering as an S-Corporation offers you:
- The ability to operate as a corporation even if the owner leaves the company or passes away.
- Pass-through taxation, as owners report their share of the profits and losses on their individual tax returns.
- A way out of being taxed twice, the way you would be in a C-Corporation. There is no double taxation occurring--once as income and again as dividend income. You save more money!
- The opportunity to issue shares of stock to increase the value of your business.
- A deduction of 20% of all S-Corp income on your personal tax return, which can significantly reduce your tax burden.
- The ability to write off the S-Corp’s losses on shareholders’ individual tax returns.
- Annual tax filing requirements, unlike C-Corps which must file every quarter.
- Corporate status, which means shareholders, directors, and officers are protected from sharing liability as long as there is no evidence of fraud or other misdeeds
But there are a few disadvantages to starting an S-Corp. One of those is the fact that, unlike a C-Corp, there are restrictions on ownership if you start a North Dakota S-Corp. S-Corporations can only be owned by United States citizens or resident aliens. Additionally, an S-Corp permits only 100 shareholders, while for a C-Corp, there is no limit. But overall, the benefits far outweigh the setbacks, and an S-Corporation is an excellent choice for many entrepreneurs looking to start a business in North Dakota.
Learn the Benefits of an S-Corp
Educating yourself about the different types of corporations can help you assess what is the right business structure for you. It is advised that you should incorporate when you anticipate taking investments or when your business approaches material size or complexity.
Submit Your Articles
of Incorporation
To create an S-Corp in North Dakota, you will also need to register your business by filling out and submitting the Articles of Incorporation. The Articles of Incorporation is a form that should be filed (and maintained) with the state of North Dakota. It establishes the basic elements of the corporation, such as the name and address of the corporation, the number and classes of stock, and certain indemnification provisions. Prior to filing, the Articles of Incorporation must be signed by each incorporator in order to authenticate it. The document can be repealed or amended with the approval of the Board of Directors.
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 S-Corp 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 North Dakota Articles of Incorporation form is accepted, congratulations! Your company now exists as a recognized legal entity that is authorized to conduct business within the State of North Dakota.
Submit Your Articles of Incorporation
To create an S-Corp in North Dakota, you will also need to register your business by filling out and submitting the Articles of Incorporation. The Articles of Incorporation is a form that should be filed (and maintained) with the state of North Dakota.
Decide on a Registered Agent
Next, figure out who the Registered Agent for the corporation should be. The State of North Dakota requires every corporation in the state to have one. This enables the state to ensure the delivery of legal mail and that court documents can be tracked appropriately. The Registered Agent will also act as the contact point between the North Dakota Secretary of State and the corporation. Once you assign someone as your Registered Agent, they can receive official correspondence and documents on behalf of your business.
A Registered Agent can be either an individual who is a resident of North Dakota 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. Your Registered Agent’s information would go on your most important North Dakota Secretary of State corporation forms.
- Possess a physical street address located in North Dakota (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 North Dakota Registered 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 North Dakota state 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. An alternative you can look into is hiring a North Dakota Commercial Registered Agent Service. We also offer a Registered Agent Service for a small charge that you can include as an add-on to your shopping cart.
Decide on a Registered Agent
Next, figure out who the Registered Agent for the corporation should be. The State of North Dakota requires every corporation in the state to have one.
Obtain an Employer
Identification Number
Next, your North Dakota S-corp 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. All corporations require an EIN, even if you don’t have any employees.
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 apply 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.
If you know your S-Corp 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.
Obtain an Employer Identification Number
Next, your S-Corp 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. All corporations require an EIN, even if you don’t have any employees.
Draft Your Corporate Bylaws
First, what are bylaws? If you’ve heard of an Operating Agreement, this is just like that, but “bylaws” is the term usually used when referring to a corporation. There is no set criteria for what your bylaws should look like, but typically, they should set forth internal rules and procedures for your ND S-Corp. Basically, bylaws are rules of operation that create the company’s structure, ensuring that employees, shareholders, and executives are in the loop about how the business will be run.
Key points are covered in the corporate bylaws document, such as when annual meetings will be held, the size of your Board of Directors, and how this form will be amended if need be. In addition, member duties are explained and solutions to common disputes between parties are offered. Voting rights and salaries are discussed, and “what if” scenarios are presented. Having bylaws allows you to set up a structure that works for your business’s unique needs instead of adhering to default regulations within the state.
While bylaws are required in some states, they are not required in North Dakota. Nevertheless, it is important to establish a set of bylaws that ensure your business runs smoothly. Filling out and filing this document prior to starting an S-Corporation in North Dakota provides protection for your business.
You can use this corporate bylaws generator to get a sense of what goes into a typical set of bylaws. To ensure it is done correctly, you can have a lawyer look over your bylaws prior to submission to ensure all necessary rules and scenarios are covered. Get legal advice from our partner Rocket Lawyer.
Draft Your Corporate Bylaws
First, what are bylaws? If you’ve heard of an Operating Agreement, this is just like that, but “bylaws” is the term usually used when referring to a corporation. There is no set criteria for what your bylaws should look like, but typically, they should set forth internal rules and procedures for your ND S-Corp.
Elect a Board of Directors
North Dakota law requires one or more director(s), but they must be individuals. The Board of Directors, while they are not involved in the daily tasks of running a business, represent or govern the corporation. Their duties include handling finances and fulfilling legal requirements, as well as determining the mission of the company.
People who do not work for your company can be a part of your Board of Directors. In fact, many businesses turn to lawyers or other business owners to fill in a spot on their Board of Directors. That way, they receive outside expertise from them, plus they may come with their own additional business contacts.
These board members must adhere to something called “the duty of loyalty,” which means that directors and officers of an S-Corporation can only make decisions without any personal economic conflict. The duty of loyalty is breached if something like a self-interested transaction occurs or a business opportunity is stolen. Plus, there is also the “duty of care” to consider. Members of the Board of Directors must make decisions that are in the best interests of the corporation at all times. For example, making a decision that causes serious losses for the shareholders would mean they are in violation of their duty of care--and they can be sued for this.
Your board members will have to hold meetings to make important decisions, such as issuing shares or amending something in the Articles of Incorporation. The Board of Directors typically receives equal voting rights (some states, like Delaware, are an exception) when making these decisions. During the first meeting of the S-Corporation's Board of Directors, directors can appoint officers, decide on bylaws, select a corporate bank, and more. All subsequent meetings must be held annually, though, of course, if more are needed, more can be held.
Minutes of the meeting, which is the recorded documentation of what was discussed or what happened during a meeting, must be recorded to exhibit transparency in business operations, but they do not need to be filed with the state. Instead, these should be kept with your other corporate records, such as the Articles of Incorporation and bylaws. These documents should be saved for at least seven years in order to protect your company.
Elect a Board of Directors
First, familiarize yourself with the roles within an S-Corporation. There are three groups:
- Shareholders
- Board of Directors
- Officers
Appoint Corporate Officers
Shareholders and directors only have the ability to make decisions as part of a group, after holding group meetings and taking votes. An individual shareholder or director does not have the power to do anything--if there are multiple shareholders and directors. If a corporation has only one shareholder or director, the decision-making, of course, falls on that person without the need for a group meeting. Officers, on the other hand, do not operate in groups. An officer holding the position of president, chief executive officer, or treasurer, for example, is an agent of the corporation and has the authority to act on behalf of the corporation on his or her own. Within smaller S-Corps, directors are sometimes also officers and shareholders. In that case, even though the same person is serving in multiple roles, each role has very different responsibilities and is treated as such.
Shareholders are the owners of the corporation, and they elect the Board of Directors. The directors, in unison, oversee and direct corporation affairs and make business decisions. They employ officers who carry out the Board of Directors’ decisions. Officers are responsible for the day-to-day operations of the company. An officer can be terminated by the Board of Directors at any time. North Dakota law states that a President, secretary, and treasurer are required.
Appoint Corporate Officers
Shareholders and directors only have the ability to make decisions as part of a group, after holding group meetings and taking votes. An individual shareholder or director does not have the power to do anything - if there are multiple shareholders and directors.
Issue Stock to your Shareholders
One of the benefits of having a North Dakota S-Corporation is being able to issue shares of stock to raise funds for your business. Shares represent the amount of money invested by the shareholders in the company. Issuing stock to your shareholders allows you to finance your business without relying on debt. Unlike taking out a business loan, you do not pay interest that eats at your profits each month. The value of your business assets can be assessed by taking a look at what amount of your business assets are owned by shareholders vs. lenders. Corporations that have a higher proportion of the company owned by lenders makes an investment in the business appear riskier. If shareholders do invest in your business and purchase stock, keep in mind that if your business fails, you would have to pay back your loans and shareholders.
While there are many advantages to issuing stock, keep in mind that shareholders have an ownership stake in the company. This means that they have certain rights, such as the ability to participate in voting and the assurance that they will be collecting dividends. Profits will be shared and decisions will have to be made in unison. The more stock you issue to shareholders, the smaller your ownership in the business (and the less of a say you have in business major business decisions). On the plus side, when your business grows, you can buy out the other shareholders and get your ownership back.
Issuing stock is not a requirement for S-Corporations, but a privilege that you can make use of if you choose. Doing so can help you fund your business if you are growing and have large, expensive projects planned in the near future. In that case, you can decide how much capital you need and figure out how many shares you’d like to issue and at what price per share. You will already have a number for how many shares you have to offer (that was decided when you filed your Articles of Incorporation). To properly assess the accurate value of each share, determine your company’s net worth first. This will help you figure out what percentage of ownership you believe each share is worth.
Typically, appointed Board of Directors can issue stock whenever and to whomever, as long as the recipient has a brokerage account and is over 18 years old. But within an S-Corp, there are a few more limitations that a C-Corp does not have. While C-Corporations can be owned by any individual or legal entity--foreign or domestic--S-Corporations can only be owned by United States citizens or resident aliens. On top of that, an S-Corp does not allow an unlimited number of shareholders. It maxes out at 100. Also, S-Corps are not permitted to be owned by a C-Corp, another S-Corp, an LLC, a partnership, or many trusts. Lastly, unlike in a C-Corp where shareholders have the option between different stock classes (common, preferred, income, value, growth), an S-Corp only permits one stock class (common).
Another thing that can limit you here is if you’ve chosen to classify your S-Corp as a private corporation. This is typically a smaller corporation where the stock isn't offered to the public. A publiC-Corporation is authorized to sell their stock to the public, while a private company can’t trade its share on public stock exchanges. But a private corporation is not always small. Many big companies are privately held--such as Dell, Koch Industries, Deloitte, and Cargill. It can be harder for private corporations to raise funds, but it can be important in order to maintain family ownership.
Whoever your corporation may sell stock to, it’s important to have a shareholder agreement for protection. This would explain the shareholder’s rights and voting power within the S-Corporation. You will want to decide and let you shareholders know what kind of say they have in the organization or management of the company when they are issued stock. North Dakota does not require an annual shareholder meeting.
Issue Stock to your Shareholders
One of the benefits of having an S-Corporation is being able to issue shares of stock to raise funds for your business. Shares represent the amount of money invested by the shareholders in the company. Issuing stock to your shareholders allows you to finance your business without relying on debt.
Familiarize Yourself with the
State’s Taxes and Licenses
A C-Corporation is taxed as a separate entity and must report any profits or losses on a corporate tax return. Shareholders are not taxed on the corporation's profits--they report and pay income taxes only on what they are paid by the corporation. North Dakota has one of the lowest state income taxes in the country--rates range from 1.1% to 2.9%.
There are also other various taxes. For example, North Dakota has a sales and use tax rate of 5%, but this can change depending on local municipalities. The total tax rate can get as high as 8.5%. The North Dakota Office of State Tax Commissioner has additional tax information.
In addition, there may be extra fees for certain insurances, permits, and licenses, depending on the state’s laws and the type of business you own. For example, you may need worker’s compensation, unemployment insurance, building permits, etc. Licenses issued by the Attorney General and Secretary of State can be found on the Official State of North Dakota website. Find out which additional requirements there may be for the location where you plan to open your business. 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
A C-Corporation is taxed as a separate entity and must report any profits or losses on a corporate tax return. Shareholders are not taxed on the corporation's profits - they report and pay income taxes only on what they are paid by the corporation.
File an Annual Report
Like most states, the State of North Dakota requires all corporation owners to file a yearly report that updates all the information that the North Dakota Secretary of State has on file. This is called the Annual Report, and for corporations, it is due annually by August 1, along with a fee of $25 payable to the North Dakota Secretary of State. Online filing of the Annual Report is available on the North Dakota Secretary of State website. Filing an Annual Report is necessary for maintaining an active status after starting an S-Corp in ND. Not filing the report or paying the fee will result in being presented a North Dakota S-Corp dissolution form, after which the state will dissolve your business.
The report can be rather complex–requiring the deciphering of gross receipts, dividends, interest, losses, and all North Dakota S-Corp fees–and 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.
File an Annual Report
Like most states, the State of North Dakota requires all corporation owners to file a yearly report that updates all the information that the North Dakota Secretary of State has on file. This is called the Annual Report, and for corporations, it is due annually by August 1, along with a fee of $25 payable to the North Dakota Secretary of State.
Raise Funds for Your S-Corp
You can’t start a business with zero capital. There are legal fees, document filing fees, taxes, employees to pay, as well as the costs of operating a business. Some of the most commonly-used options for obtaining funding for your S-Corp 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
- Issuing stock to shareholders
Many new S-Corporation 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 people to your team. S-Corporations may have a single person as the company's owner, or an unlimited number of shareholders participating in the ownership of the business. 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 bylaws and ensure that you are still the primary owner of your North Dakota S-Corporation.
Raise Funds for Your S-Corp
You can’t start a business with zero capital. There are legal fees, document filing fees, taxes, employees to pay, as well as the costs 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 S-Corp 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.
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 North Dakota corp name tips:
- Follow S-Corp naming guidelines. A corporation’s name usually has to include words, like Corporation, Incorporated, Company, or Limited; or abbreviations, like Corp., Inc., Co., or Ltd. 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 getting an S-Corp in North Dakota you will need an original name that is not in use by another corporation. To check if a name has already been taken, you can try the North Dakota Business Name Availability. If you are not ready to file an S-Corp in North Dakota today but want to reserve a name in the meantime, you can do so by filling out the form (and paying a $25 fee) here. This puts a hold on the name for 120 days.
- Make sure it is available as a web domain. This way, you can find out if another company outside of North Dakota has a corporation 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
Once you become an official S-Corporation in the state of North Dakota, make sure you keep your S-Corp compliant. Remember all important dates and make all necessary payments on time. Know all of the laws regarding the issuing of stocks. Host all necessary annual meetings. This is mandatory if you don’t want your new business to run into any issues. 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.
Don’t forget to make sure you’ve obtained all necessary permits, licenses, and insurances that your ND corp might need—and you’re good to go! Begin operating your North Dakota business with peace of mind, knowing that you are protected by an S-Corp in case anything unforeseeable affects your new business venture.
Begin Operating Your Business
Once you become an official S-Corporation in the state of North Dakota, make sure you keep your S-Corp compliant. Remember all important dates and make all necessary payments on time. Know all of the laws regarding the issuing of stocks. Host all necessary annual meetings.
North Carolina S-Corp
Learn the Benefits of an S-Corp
When you decide to start a business, there are a number of business entities to choose from. Each has its own advantages and disadvantages, which we will introduce to you here. Prospective business owners should consult with professionals, such as a business attorney and accountants, before making the final decision. But educating yourself about the different types of corporations can help you assess what is the right business structure for you beforehand.
But first, are you ready to incorporate? It is advised that you should incorporate when you anticipate taking investments or when your business approaches material size or complexity.
Typically, “material size” means a business with revenue above $100,000. Once you know you’re ready, you have the option between choosing to classify your business as a C-Corporation or an S-Corporation. While S-Corps used to be the way to go for small businesses (it’s even been nicknamed the “Small BusinesS-Corporation”), thanks to the 2017 Tax Cuts and Jobs Act, C-Corps may now offer lower corporate tax rates to smaller business. Now, S-Corps are sometimes advisable for larger businesses. But keep in mind that C-Corps give you more options to expand and raise money, which can be very beneficial to a larger business. You may want to discuss the differences with a financial advisor or lawyer who can help break down all of the costs to help you assess what will work best for you.
Whether you choose to structure your business entity as a C or S-Corporation will determine how much you’ll pay in taxes, the ways you’re permitted to raise money, and the ease with which you can expand as your business grows. The standard and most common type of corporation is a C-Corporation. In fact, a C-Corp is the default type of corporation, and all S-Corps begin as a C-Corp or LLC. When you initially incorporate, your company will automatically become a standard C-Corp, and only after you file multiple forms can you transition to an S-Corp for federal tax purposes.
If there is an issue with a product, an S-Corp protects you. Compensation can only be taken from the S-Corp’s assets, not your personal assets.
Start Your S-Corp NowHow do you know which type of corporation you want to register your business as when they are both so similar? Both types of corporations offer owners protection from individual liability, so shareholders (and directors, officers, and employees) are typically not personally responsible for business debts. C-Corps and S-Corps require similar paperwork. In addition, both are owned by shareholders, have a Board of Directors with annual meetings, and are managed by executive officers. It is also a requirement that both types of corporations pay annual fees, set up bylaws, and issue stock. Basically, an S-Corporation is the legal equivalent of a regular C-Corporation. Both have the same rights. They just pays taxes differently.
But why opt for an S-Corp? What are the benefits of setting up your North Carolina business as an S-Corp?
The main difference between a C and S-Corporation is that an S-Corp is not treated as a disregarded entity. It is a pass-through tax entity. While a C-Corp’s tax attributes are determined at the entity level, an S-Corp determines its own income, deductions, credits, etc. It spreads out the tax attributes among its owners (or to its sole owner) as part of shared ownership. Likewise, within an S-Corporation, the profits are passed on to the shareholders, who are then taxed based on their personal returns. Unlike a C-Corporation, an S-Corporation is required to file an annual information tax return. A few other differences are that S-Corps must have no more than 100 shareholders (all individuals, not corporations), have only one class of stock, and be owned by U.S. citizens or resident aliens.
There are advantages to setting up your business as a North Carolina S-Corp. Registering as an S-Corporation offers you:
- The ability to operate as a corporation even if the owner leaves the company or passes away.
- Pass-through taxation, as owners report their share of the profits and losses on their individual tax returns.
- A way out of being taxed twice, the way you would be in a C-Corporation. There is no double taxation occurring--once as income and again as dividend income. You save more money!
- The opportunity to issue shares of stock to increase the value of your business.
- A deduction of 20% of all S-Corp income on your personal tax return, which can significantly reduce your tax burden.
- The ability to write off the S-Corp’s losses on shareholders’ individual tax returns.
- Annual tax filing requirements, unlike C-Corps which must file every quarter.
- Corporate status, which means shareholders, directors, and officers are protected from sharing liability as long as there is no evidence of fraud or other misdeeds
But there are a few disadvantages to starting an S-Corp. One of those is the fact that, unlike a C-Corp, there are restrictions on ownership if you create a North Carolina S-Corp. S-Corporations can only be owned by United States citizens or resident aliens. Additionally, an S-Corp permits only 100 shareholders, while for a C-Corp, there is no limit. But overall, the benefits far outweigh the setbacks, and an S-Corporation is an excellent choice for many entrepreneurs looking to start a business in North Carolina.
Learn the Benefits of an S-Corp
Educating yourself about the different types of corporations can help you assess what is the right business structure for you. It is advised that you should incorporate when you anticipate taking investments or when your business approaches material size or complexity.
Decide on a Registered Agent
Next, figure out who the Registered Agent for the corporation should be. The State of North Carolina requires every corporation in the state to have one. This enables the state to ensure the delivery of legal mail and that court documents can be tracked appropriately. The Registered Agent will also act as the contact point between the North Carolina Secretary of State and the corporation. Once you assign someone as your Registered Agent, they can receive official correspondence and documents on behalf of your business.
A Registered Agent can be either an individual who is a resident of North Carolina 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. Your Registered Agent’s information would go on your most important North Carolina Secretary of State corporation forms.
- Possess a physical street address located in North Carolina (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 North Carolina Registered 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 North Carolina state 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. An alternative you can look into is hiring a North Carolina Commercial Registered Agent Service. We also offer a Registered Agent Service for a small charge that you can include as an add-on to your shopping cart.
Decide on a Registered Agent
Next, figure out who the Registered Agent for your S-Corp should be. The State of North Carolina requires every S-Corporation in the state to have one.
Obtain an Employer
Identification Number
Next, your S-Corp 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. All corporations require an EIN, even if you don’t have any employees.
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 apply 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.
If you know your S-Corp 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.
Obtain an Employer Identification Number
Next, your S-Corp 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. All corporations require an EIN, even if you don’t have any employees.
Submit Your Articles
of Incorporation
To create an S-Corp in North Carolina, you will also need to register your business by filling out and submitting the Articles of Incorporation. The Articles of Incorporation is a form that should be filed (and maintained) with the state of North Carolina. It establishes the basic elements of the corporation, such as the name and address of the corporation, the number and classes of stock, and certain indemnification provisions. Prior to filing, the Articles of Incorporation must be signed by each incorporator in order to authenticate it. The document can be repealed or amended with the approval of the Board of Directors.
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 S-Corp 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 North Carolina Articles of Incorporation form is accepted, congratulations! Your company now exists as a recognized legal entity that is authorized to conduct business within the State of North Carolina.
Submit Your Articles of Incorporation
To create an S-Corp in Tennessee, you will also need to register your business by filling out and submitting the Articles of Incorporation. The Articles of Incorporation is a form that should be filed (and maintained) with the state of Tennessee.
Draft Your Corporate Bylaws
First, what are bylaws? If you’ve heard of an Operating Agreement, this is just like that, but “bylaws” is the term usually used when referring to a corporation. There is no set criteria for what your bylaws should look like, but typically, they should set forth internal rules and procedures for your NC S-Corp. Basically, bylaws are rules of operation that create the company’s structure, ensuring that employees, shareholders, and executives are in the loop about how the business will be run.
Key points are covered in the corporate bylaws document, such as when annual meetings will be held, the size of your Board of Directors, and how this form will be amended if need be. In addition, member duties are explained and solutions to common disputes between parties are offered. Voting rights and salaries are discussed, and “what if” scenarios are presented. Having bylaws allows you to set up a structure that works for your business’s unique needs instead of adhering to default regulations within the state.
While bylaws are not required in some states, they are required in North Carolina. It is important to establish a set of bylaws that ensure your business runs smoothly. Filling out and filing this document prior to starting an S-Corporation in North Carolina provides protection for your business.
You can use this corporate bylaws generator to get a sense of what goes into a typical set of bylaws. To ensure it is done correctly, you can have a lawyer look over your bylaws prior to submission to ensure all necessary rules and scenarios are covered. Get legal advice from our partner Rocket Lawyer.
Draft Your Corporate Bylaws
First, what are bylaws? If you’ve heard of an Operating Agreement, this is just like that, but “bylaws” is the term usually used when referring to a corporation. There is no set criteria for what your bylaws should look like, but typically, they should set forth internal rules and procedures for your S-Corporation.
Elect a Board of Directors
North Carolina law requires one or more director(s). The Board of Directors, while they are not involved in the daily tasks of running a business, represent or govern the corporation. Their duties include handling finances and fulfilling legal requirements, as well as determining the mission of the company.
People who do not work for your company can be a part of your Board of Directors. In fact, many businesses turn to lawyers or other business owners to fill in a spot on their Board of Directors. That way, they receive outside expertise from them, plus they may come with their own additional business contacts.
These board members must adhere to something called “the duty of loyalty,” which means that directors and officers of an S-Corporation can only make decisions without any personal economic conflict. The duty of loyalty is breached if something like a self-interested transaction occurs or a business opportunity is stolen. Plus, there is also the “duty of care” to consider. Members of the Board of Directors must make decisions that are in the best interests of the corporation at all times. For example, making a decision that causes serious losses for the shareholders would mean they are in violation of their duty of care--and they can be sued for this.
Your board members will have to hold meetings to make important decisions, such as issuing shares or amending something in the Articles of Incorporation. The Board of Directors typically receives equal voting rights (some states, like Delaware, are an exception) when making these decisions. During the first meeting of the S-Corporation's Board of Directors, directors can appoint officers, decide on bylaws, select a corporate bank, and more. All subsequent meetings must be held annually, though, of course, if more are needed, more can be held.
Minutes of the meeting, which is the recorded documentation of what was discussed or what happened during a meeting, must be recorded to exhibit transparency in business operations, but they do not need to be filed with the state. Instead, these should be kept with your other corporate records, such as Certificate of Formation and bylaws. These documents should be saved for at least seven years in order to protect your company.
Elect a Board of Directors
First, familiarize yourself with the roles within an S-Corporation. There are three groups:
- Shareholders
- Board of Directors
- Officers
Appoint Corporate Officers
Shareholders and directors only have the ability to make decisions as part of a group, after holding group meetings and taking votes. An individual shareholder or director does not have the power to do anything--if there are multiple shareholders and directors. If a corporation has only one shareholder or director, the decision-making, of course, falls on that person without the need for a group meeting. Officers, on the other hand, do not operate in groups. An officer holding the position of president, chief executive officer, or treasurer, for example, is an agent of the corporation and has the authority to act on behalf of the corporation on his or her own. Within smaller S-Corps, directors are sometimes also officers and shareholders. In that case, even though the same person is serving in multiple roles, each role has very different responsibilities and is treated as such.
Shareholders are the owners of the corporation, and they elect the Board of Directors. The directors, in unison, oversee and direct corporation affairs and make business decisions. They employ officers who carry out the Board of Directors’ decisions. Officers are responsible for the day-to-day operations of the company. An officer can be terminated by the Board of Directors at any time. North Carolina requirements state that there should be a minimum of one officer in all corporations--or as stated in the bylaws. One person may hold multiple offices. If there are multiple officers, one officer is responsible for maintaining all corporate records.
Appoint Corporate Officers
Shareholders and directors only have the ability to make decisions as part of a group, after holding group meetings and taking votes. An individual shareholder or director does not have the power to do anything - if there are multiple shareholders and directors.
Issue Stock to your Shareholders
One of the benefits of having an S-Corporation is being able to issue shares of stock to raise funds for your business. Shares represent the amount of money invested by the shareholders in the company. Issuing stock to your shareholders allows you to finance your business without relying on debt. Unlike taking out a business loan, you do not pay interest that eats at your profits each month. The value of your business assets can be assessed by taking a look at what amount of your business assets are owned by shareholders vs. lenders. Corporations that have a higher proportion of the company owned by lenders makes an investment in the business appear riskier. If shareholders do invest in your business and purchase stock, keep in mind that if your business fails, you would have to pay back your loans and shareholders.
While there are many advantages to issuing stock, keep in mind that shareholders have an ownership stake in the company. This means that they have certain rights, such as the ability to participate in voting and the assurance that they will be collecting dividends. Profits will be shared and decisions will have to be made in unison. The more stock you issue to shareholders, the smaller your ownership in the business (and the less of a say you have in business major business decisions). On the plus side, when your business grows, you can buy out the other shareholders and get your ownership back.
Issuing stock is not a requirement for S-Corporations, but a privilege that you can make use of if you choose. Doing so can help you fund your business if you are growing and have large, expensive projects planned in the near future. In that case, you can decide how much capital you need and figure out how many shares you’d like to issue and at what price per share. You will already have a number for how many shares you have to offer (that was decided when you filed your Articles of Incorporation). To properly assess the accurate value of each share, determine your company’s net worth first. This will help you figure out what percentage of ownership you believe each share is worth.
Typically, appointed Board of Directors can issue stock whenever and to whomever, as long as the recipient has a brokerage account and is over 18 years old. But within an S-Corp, there are a few more limitations that a C-Corp does not have. While C-Corporations can be owned by any individual or legal entity--foreign or domestic--S-Corporations can only be owned by United States citizens or resident aliens. On top of that, an S-Corp does not allow an unlimited number of shareholders. It maxes out at 100. Also, S-Corps are not permitted to be owned by a C-Corp, another S-Corp, an LLC, a partnership, or many trusts. Lastly, unlike in a C-Corp where shareholders have the option between different stock classes (common, preferred, income, value, growth), an S-Corp only permits one stock class (common).
Another thing that can limit you here is if you’ve chosen to classify your S-Corp as a private corporation. This is typically a smaller corporation where the stock isn't offered to the public. A publiC-Corporation is authorized to sell their stock to the public, while a private company can’t trade its share on public stock exchanges. But a private corporation is not always small. Many big companies are privately held--such as Dell, Koch Industries, Deloitte, and Cargill. It can be harder for private corporations to raise funds, but it can be important in order to maintain family ownership.
Whoever your corporation may sell stock to, it’s important to have a shareholder agreement for protection. This would explain the shareholder’s rights and voting power within the S-Corporation. You will want to decide and let you shareholders know what kind of say they have in the organization or management of the company when they are issued stock. North Carolina requires an annual shareholder meeting.
Issue Stock to your Shareholders
One of the benefits of having a North Carolina C-Corporation is being able to issue shares of stock to raise funds for your business. Shares represent the amount of money invested by the shareholders in the company. Issuing stock to your shareholders allows you to finance your business without relying on debt.
Familiarize Yourself with the
State’s Taxes and Licenses
Typically, income from pass-through entities, such as an NC LLCs and NC S-Corp, “passes through” the business to the owners, who are required to report this information on their personal tax returns. Each individual S-Corp member will then have to pay taxes on his or her share of the S-Corp’s income. The state of North Carolina recognizes the federal S election for tax purposes. North Carolina S-Corps are not required to pay corporate income tax to the state like a C-Corp. Therefore, taxes are only owed by each individual shareholder on his or her share of the company’s income. The flat income tax rate is 5.499%, and all taxpayers pay this rate regardless of their taxable income or filing status. In addition, S-Corporations in North Carolina have to pay the franchise tax on net worth--which is a minimum of $200 a year.
Some states also charge other various taxes. For example, employers owe payroll tax on their employees’ wages. Additionally, North Carolina has a sales and use tax of 4.75%, as well as other taxes. More information on other types of taxes can be found on the North Carolina Department of Revenue website.
There may be extra fees for certain insurances, permits, and licenses, depending on the State of North Carolina’s laws and the type of business you own. For example, you may need worker’s compensation, unemployment insurance, building permits, etc. You can find out information about North Carolina licenses and permits on the NC Secretary of State website. Find out which additional requirements there may be for the location where you plan to open your business. 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
Typically, income from pass-through entities, such as an NC LLCs and NC S-Corp, “passes through” the business to the owners, who are required to report this information on their personal tax returns. Each individual S-Corp member will then have to pay taxes on his or her share of the S-Corp’s income.
File an Annual Report
ike most states, the State of North Carolina requires all corporation owners to file a yearly report that updates all the information that the North Carolina Secretary of State (SOS) has on file. This is called the Annual Report, and it is due annually by April 15, along with a processing fee payable to the North Carolina SOS of $22.50 for online submissions and $25 for mailed printed forms. For either online or mailed submissions, visit the North Carolina SOS website for instructions. Filing an Annual Report is necessary for maintaining an active status after starting an S-Corp in NC. Not filing the report or paying the fee will result in being presented a North Carolina S-Corp dissolution form, after which the state will dissolve your business.
The report can be rather complex–requiring the deciphering of gross receipts, dividends, interest, losses, and all North Carolina S-Corp fees–and 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
Like most states, the State of North Carolina requires all corporation owners to file a yearly report that updates all the information that the North Carolina Secretary of State (SOS) has on file.
Raise Funds for Your Corporation
You can’t start a business in North Carolina with zero capital. There are legal fees, North Carolina corp document filing fees, taxes, employees to pay, as well as the costs of operating a business. Some of the most commonly-used options for obtaining funding for your S-Corp 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
- Issuing stock to shareholders
Many new S-Corporation 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 people to your team. S-Corporations may have a single person as the company's owner, or an unlimited number of shareholders participating in the ownership of the business. 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 bylaws and ensure that you are still the primary owner of your North Carolina S-Corporation.
Raise Funds for Your Corporation
You can’t start a business with zero capital. There are legal fees, document filing fees, taxes, employees to pay, as well as the costs of operating a business.
Create a Business Website
Creating a website for your North Carolina 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 S-Corp 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.
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 North Carolina corporation name tips:
- Follow S-Corp naming guidelines. A corporation’s name usually has to include words, like Corporation, Incorporated, Company, or Limited; or abbreviations, like Corp., Inc., Co., or Ltd. 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. To check if the North Carolina corporation name has already been taken, you can search the Department of State Division of Corporation, State Records and UCC website. They have a Corporation and Business Entity Database that has all North Carolina corporation names listed. If you are not ready to file your North Carolina S-Corp today but want to reserve a name to ensure that it is not taken, you can file an Application for Reservation of Name, which will reserve the business name for you for 60 days.
- Make sure it is available as a web domain. This way, you can find out if another company outside of North Carolina has a corporation 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
Once you become an official S-Corporation in the state of North Carolina, make sure you keep your S-Corp compliant. Remember all important dates and make all necessary payments on time. Know all of the laws regarding the issuing of stocks. Host all necessary annual meetings. This is mandatory if you don’t want your new business to run into any issues. 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.
Next, make sure you’ve obtained all necessary permits, licenses, and insurances that your NC-Corp might need—and you’re good to go! Begin operating your North Carolina business with peace of mind, knowing that you are protected by an S-Corp in case anything unforeseeable affects your new business venture.
Begin Operating Your Business
Once you become an official S-Corporation in the state of North Carolina, make sure you keep your S-Corp compliant. Remember all important dates and make all necessary payments on time. Know all of the laws regarding the issuing of stocks. Host all necessary annual meetings.
New York S-Corp
Learn the Benefits of an S-Corp
When you decide to start a business, there are a number of business entities to choose from. Each has its own advantages and disadvantages, which we will introduce to you here. Prospective business owners should consult with professionals, such as a business attorney and accountants, before making the final decision. But educating yourself about the different types of corporations can help you assess what is the right business structure for you beforehand.
But first, are you ready to incorporate? It is advised that you should incorporate when you anticipate taking investments or when your business approaches material size or complexity.
Typically, “material size” means a business with revenue above $100,000. Once you know you’re ready, you have the option between choosing to classify your business as a C-Corporation or an S-Corporation. While S-Corps used to be the way to go for small businesses (it’s even been nicknamed the “Small BusinesS-Corporation”), thanks to the 2017 Tax Cuts and Jobs Act, C-Corps may now offer lower corporate tax rates to smaller business. Now, S-Corps are sometimes advisable for larger businesses. But keep in mind that C-Corps give you more options to expand and raise money, which can be very beneficial to a larger business. You may want to discuss the differences with a financial advisor or lawyer who can help break down all of the costs to help you assess what will work best for you.
Whether you choose to structure your business entity as a C or S-Corporation will determine how much you’ll pay in taxes, the ways you’re permitted to raise money, and the ease with which you can expand as your business grows. The standard and most common type of corporation is a C-Corporation. In fact, a C-Corp is the default type of corporation, and all S-Corps begin as a C-Corp or LLC. When you initially incorporate, your company will automatically become a standard C-Corp, and only after you file multiple forms can you transition to an S-Corp for federal tax purposes.
If there is an issue with a product, an S-Corp protects you. Compensation can only be taken from the S-Corp’s assets, not your personal assets.
Start Your S-Corp NowHow do you know which type of corporation you want to register your business as when they are both so similar? Both types of corporations offer owners protection from individual liability, so shareholders (and directors, officers, and employees) are typically not personally responsible for business debts. C-Corps and S-Corps require similar paperwork. In addition, both are owned by shareholders, have a Board of Directors with annual meetings, and are managed by executive officers. It is also a requirement that both types of corporations pay annual fees, set up bylaws, and issue stock. Basically, an S-Corporation is the legal equivalent of a regular C-Corporation. Both have the same rights. They just pays taxes differently.
But why opt for an S-Corp? What are the benefits of setting up your New York business as an S-Corp?
The main difference between a C and S-Corporation is that an S-Corp is not treated as a disregarded entity. It is a pass-through tax entity. While a C-Corp’s tax attributes are determined at the entity level, an S-Corp determines its own income, deductions, credits, etc. It spreads out the tax attributes among its owners (or to its sole owner) as part of shared ownership. Likewise, within an S-Corporation, the profits are passed on to the shareholders, who are then taxed based on their personal returns. Unlike a C-Corporation, an S-Corporation is required to file an annual information tax return. A few other differences are that S-Corps must have no more than 100 shareholders (all individuals, not corporations), have only one class of stock, and be owned by U.S. citizens or resident aliens.
There are advantages to setting up an S-Corp in New York. Registering as an S-Corporation offers you:
- The ability to operate as a corporation even if the owner leaves the company or passes away.
- Pass-through taxation, as owners report their share of the profits and losses on their individual tax returns.
- A way out of being taxed twice, the way you would be in a C-Corporation. There is no double taxation occurring--once as income and again as dividend income. You save more money!
- The opportunity to issue shares of stock to increase the value of your business.
- A deduction of 20% of all S-Corp income on your personal tax return, which can significantly reduce your tax burden.
- The ability to write off the S-Corp’s losses on shareholders’ individual tax returns.
- Annual tax filing requirements, unlike C-Corps which must file every quarter.
- Corporate status, which means shareholders, directors, and officers are protected from sharing liability as long as there is no evidence of fraud or other misdeeds
But there are a few disadvantages to starting an S-Corp. One of those is the fact that, unlike a C-Corp, there are restrictions on ownership if you start a New York S-Corp. S-Corporations can only be owned by United States citizens or resident aliens. Additionally, an S-Corp permits only 100 shareholders, while for a C-Corp, there is no limit. But overall, the benefits far outweigh the setbacks, and an S-Corporation is an excellent choice for many entrepreneurs looking to start a business in New York.
Learn the Benefits of an S-Corp
Educating yourself about the different types of corporations can help you assess what is the right business structure for you. It is advised that you should incorporate when you anticipate taking investments or when your business approaches material size or complexity.
Decide on a Registered Agent
Next, figure out who the Registered Agent for the corporation should be. The State of New York requires every corporation in the state to have one. This enables the state to ensure the delivery of legal mail and that court documents can be tracked appropriately. The Registered Agent will also act as the contact point between the New York Secretary of State and the corporation. Once you assign someone as your Registered Agent, they can receive official correspondence and documents on behalf of your business.
A Registered Agent can be either an individual who is a resident of New York 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. Your Registered Agent’s information would go on your most important New York Secretary of State corporation forms.
- Possess a physical street address located in New York (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 New York Registered 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 New York’S-Corporation 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. An alternative you can look into is hiring a New York Registered Agent Service. We also offer a Registered Agent Service for a small charge that you can include as an add-on to your shopping cart.
Decide on a Registered Agent
Next, figure out who the Registered Agent for the corporation should be. The State of New York requires every corporation in the state to have one. This enables the state to ensure the delivery of legal mail and that court documents can be tracked appropriately.
Obtain an Employer
Identification Number
Next, your S-Corp 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. All corporations require an EIN, even if you don’t have any employees.
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 apply 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.
If you know your S-Corp 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.
Obtain an Employer Identification Number
Next, your S-Corp 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. All corporations require an EIN, even if you don’t have any employees.
Submit Your
Articles of Incorporation
To create an S-Corp in New York, you will also need to register your business by filling out and submitting the Articles of Incorporation. The Articles of Incorporation is a form that should be filed (and maintained) with the state of New York. It establishes the basic elements of the corporation, such as the name and address of the corporation, the number and classes of stock, and certain indemnification provisions. Prior to filing, the Articles of Incorporation must be signed by each incorporator in order to authenticate it. The document can be repealed or amended with the approval of the Board of Directors.
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 S-Corp 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 New York Articles of Incorporation form is accepted, congratulations! Your company now exists as a recognized legal entity that is authorized to conduct business within the State of New York.
Submit Your Articles of Incorporation
To create an S-Corp in New York, you will also need to register your business by filling out and submitting the Articles of Incorporation. The Articles of Incorporation is a form that should be filed (and maintained) with the state of New York.
Draft Your Corporate Bylaws
First, what are bylaws? If you’ve heard of an Operating Agreement, this is just like that, but “bylaws” is the term usually used when referring to a corporation. There is no set criteria for what your bylaws should look like, but typically, they should set forth internal rules and procedures for your S-Corporation. Basically, bylaws are rules of operation that create the company’s structure, ensuring that employees, shareholders, and executives are in the loop about how the business will be run.
Key points are covered in the corporate bylaws document, such as when annual meetings will be held, the size of your Board of Directors, and how this form will be amended if need be. In addition, member duties are explained and solutions to common disputes between parties are offered. Voting rights and salaries are discussed, and “what if” scenarios are presented. Having bylaws allows you to set up a structure that works for your business’s unique needs instead of adhering to default regulations within the state.
While bylaws are not required in some states, they are required in New York. It is important to establish a set of bylaws that ensure your business runs smoothly. Filling out and filing this document prior to starting an S-Corporation in New York provides protection for your business.
You can use this corporate bylaws generator to get a sense of what goes into a typical set of bylaws. To ensure it is done correctly, you can have a lawyer look over your bylaws prior to submission to ensure all necessary rules and scenarios are covered. Get legal advice from our partner Rocket Lawyer.
Draft Your Corporate Bylaws
First, what are bylaws? If you’ve heard of an Operating Agreement, this is just like that, but “bylaws” is the term usually used when referring to a corporation.
Elect a Board of Directors
New York law requires one or more director(s). The Board of Directors, while they are not involved in the daily tasks of running a business, represent or govern the corporation. Their duties include handling finances and fulfilling legal requirements, as well as determining the mission of the company.
People who do not work for your company can be a part of your Board of Directors. In fact, many businesses turn to lawyers or other business owners to fill in a spot on their Board of Directors. That way, they receive outside expertise from them, plus they may come with their own additional business contacts.
These board members must adhere to something called “the duty of loyalty,” which means that directors and officers of an S-Corporation can only make decisions without any personal economic conflict. The duty of loyalty is breached if something like a self-interested transaction occurs or a business opportunity is stolen. Plus, there is also the “duty of care” to consider. Members of the Board of Directors must make decisions that are in the best interests of the corporation at all times. For example, making a decision that causes serious losses for the shareholders would mean they are in violation of their duty of care and they can be sued for this.
Your board members will have to hold meetings to make important decisions, such as issuing shares or amending something in the Articles of Incorporation. The Board of Directors typically receives equal voting rights (some states, like Delaware, are an exception) when making these decisions. During the first meeting of the S-Corporation's Board of Directors, directors can appoint officers, decide on bylaws, select a corporate bank, and more. All subsequent meetings must be held annually, though, of course, if more are needed, more can be held.
Minutes of the meeting, which is the recorded documentation of what was discussed or what happened during a meeting, must be recorded to exhibit transparency in business operations, but they do not need to be filed with the state. Instead, these should be kept with your other corporate records, such as Articles of Incorporation and bylaws. These documents should be saved for at least seven years in order to protect your company.
Elect a Board of Directors
First, familiarize yourself with the roles within an S-Corporation. There are three groups:
- Shareholders
- Board of Directors
- Officers
Appoint Corporate Officers
Shareholders and directors only have the ability to make decisions as part of a group, after holding group meetings and taking votes. An individual shareholder or director does not have the power to do anything--if there are multiple shareholders and directors. If a corporation has only one shareholder or director, the decision-making, of course, falls on that person without the need for a group meeting. Officers, on the other hand, do not operate in groups. An officer holding the position of president, chief executive officer, or treasurer, for example, is an agent of the corporation and has the authority to act on behalf of the corporation on his or her own. Within smaller S-Corps, directors are sometimes also officers and shareholders. In that case, even though the same person is serving in multiple roles, each role has very different responsibilities and is treated as such.
Shareholders are the owners of the corporation, and they elect the Board of Directors. The directors, in unison, oversee and direct corporation affairs and make business decisions. They employ officers who carry out the Board of Directors’ decisions. Officers are responsible for the day-to-day operations of the company. An officer can be terminated by the Board of Directors at any time. New York requirements state that there should be as many officers as stated in the bylaws or as determined by the Board of Directors.
New York requirements state that there should be as many officers as stated in the bylaws, but a minimum of one. One person may hold multiple offices. If there are multiple officers, one officer is responsible for maintaining all corporate records.
Appoint Corporate Officers
Shareholders and directors only have the ability to make decisions as part of a group, after holding group meetings and taking votes. An individual shareholder or director does not have the power to do anything - if there are multiple shareholders and directors.
Issue Stock to your Shareholders
One of the benefits of having an S-Corporation is being able to issue shares of stock to raise funds for your business. Shares represent the amount of money invested by the shareholders in the company. Issuing stock to your shareholders allows you to finance your business without relying on debt. Unlike taking out a business loan, you do not pay interest that eats at your profits each month. The value of your business assets can be assessed by taking a look at what amount of your business assets are owned by shareholders vs. lenders. Corporations that have a higher proportion of the company owned by lenders makes an investment in the business appear riskier. If shareholders do invest in your business and purchase stock, keep in mind that if your business fails, you would have to pay back your loans and shareholders.
While there are many advantages to issuing stock, keep in mind that shareholders have an ownership stake in the company. This means that they have certain rights, such as the ability to participate in voting and the assurance that they will be collecting dividends. Profits will be shared and decisions will have to be made in unison. The more stock you issue to shareholders, the smaller your ownership in the business (and the less of a say you have in business major business decisions). On the plus side, when your business grows, you can buy out the other shareholders and get your ownership back.
Issuing stock is not a requirement for S-Corporations, but a privilege that you can make use of if you choose. Doing so can help you fund your business if you are growing and have large, expensive projects planned in the near future. In that case, you can decide how much capital you need and figure out how many shares you’d like to issue and at what price per share. You will already have a number for how many shares you have to offer (that was decided when you filed your Articles of Incorporation). To properly assess the accurate value of each share, determine your company’s net worth first. This will help you figure out what percentage of ownership you believe each share is worth.
Typically, appointed Board of Directors can issue stock whenever and to whomever, as long as the recipient has a brokerage account and is over 18 years old. But within an S-Corp, there are a few more limitations that a C-Corp does not have. While C-Corporations can be owned by any individual or legal entity--foreign or domestic--S-Corporations can only be owned by United States citizens or resident aliens. On top of that, an S-Corp does not allow an unlimited number of shareholders. It maxes out at 100. Also, S-Corps are not permitted to be owned by a C-Corp, another S-Corp, an LLC, a partnership, or many trusts. Lastly, unlike in a C-Corp where shareholders have the option between different stock classes (common, preferred, income, value, growth), an S-Corp only permits one stock class (common).
Another thing that can limit you here is if you’ve chosen to classify your S-Corp as a private corporation. This is typically a smaller corporation where the stock isn't offered to the public. A publiC-Corporation is authorized to sell their stock to the public, while a private company can’t trade its share on public stock exchanges. But a private corporation is not always small. Many big companies are privately held--such as Dell, Koch Industries, Deloitte, and Cargill. It can be harder for private corporations to raise funds, but it can be important in order to maintain family ownership.
Whoever your corporation may sell stock to, it’s important to have a shareholder agreement for protection. This would explain the shareholder’s rights and voting power within the S-Corporation. You will want to decide and let you shareholders know what kind of say they have in the organization or management of the company when they are issued stock. New York requires an annual shareholder meeting.
Issue Stock to your Shareholders
One of the benefits of having an S-Corporation is being able to issue shares of stock to raise funds for your business. Shares represent the amount of money invested by the shareholders in the company. Issuing stock to your shareholders allows you to finance your business without relying on debt.
Familiarize Yourself with the
State’s Taxes and Licenses
Income from pass-through entities, such as a New York Limited Liability Company and New York State S-Corp, “pass through” the business to the owners, who are required to report this information on their personal tax returns. Each individual S-Corp member will then have to pay taxes on his or her share of the S-Corp’s income. A New York S-Corp does not pay federal or state income taxes. Instead, the business would need to pay NY S-Corp filing fees that vary depending on their gross income. The minimum fee is $25. Additionally, some states charge the S-Corp other various taxes, such as sales tax. Be sure to look into all of the specifics. More information can be found in the New York Department of Taxation and Finance publication.
In addition, New York has a variety of other taxes that corporation owners must pay. For example, employers owe payroll tax on employees wages. Additionally, New York has a state sales and use tax rate that businesses that sell products or services are subjected to. The sales tax rate is 4%, but this varies per city. For example, if you add the average county and city sales tax rates to the state rate, the combined rate for New York City, NY is 8%. Most additional tax-related information can be found on the Official New York Government Website.
In addition, there may be extra fees for certain insurances, permits, and licenses, depending on the state’s laws and the type of business you own. For example, you may need worker’s compensation, unemployment insurance, building permits, etc. New York has a long list of licenses and regulations that depend on the type of business you have as well as where in New York it is located. For example, if you plan to have an NYC S-Corp, this is the list of licenses just for New York City. Find out what the requirements are for the location where you plan to open your business. 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.
The main benefit of having a NY S-Corp instead of a New York LLC is that your business saves money on self-employment taxes. The owners of an S-Corp do not pay self employment taxes on salaries they are paid by the corporation.
Familiarize Yourself with the State’s Taxes and Licenses
Income from pass-through entities, such as a New York Limited Liability Company and New York State S-Corp, “pass through” the business to the owners, who are required to report this information on their personal tax returns.
File a Biennial Report
Like most states, the State of New York requires all S-Corp owners to file a report that updates all the information that the New York Department of State has on file. While most states require this report to be submitted annually for corporations, New York requires a submission biennially--by the end of the registration anniversary month.
Good news for prospective S-Corp owners in New York: while some states charge over $500 every single year as a required fee that all corporation owners must pay when submitting their Reports, New York requires a fee of only $9 that owners need to pay once every two years when submitting their Biennial Reports.
Online filing is available on the Department of State, Division of Corporations, State Records, and UCC website. Filing a Biennial Report is necessary for maintaining an active status after starting an S-Corp in NY. Not filing the report or paying the fee will result in being presented a New York corporation dissolution form, after which the state will dissolve your business.
File a Biennial Report
Like most states, the State of New York requires all S-Corp owners to file a report that updates all the information that the New York Department of State has on file.
Raise Funds for Your Corporation
You can’t start a business with zero capital. There are legal fees, document filing fees, taxes, employees to pay, as well as the costs of operating a business. Some of the most commonly-used options for obtaining funding for your S-Corp 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
- Issuing stock to shareholders
Many new S-Corporation 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 people to your team. S-Corporations may have a single person as the company's owner, or an unlimited number of shareholders participating in the ownership of the business. 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 bylaws and ensure that you are still the primary owner of your New York S-Corporation.
Raise Funds for Your S-Corp
You can’t start a business with zero capital. There are legal fees, document filing fees, taxes, employees to pay, as well as the costs of operating a business.
Create a Business Website
Creating a website for your New York 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 S-Corp 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.
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 New York corporation name tips:
- Follow S-Corp naming guidelines. A corporation’s name usually has to include words, like Corporation, Incorporated, Company, or Limited; or abbreviations, like Corp., Inc., Co., or Ltd. 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 S-Corporation in the State of New York, you will need an original name that is not in use by another corporation. To check if the New York corporation name has already been taken, you can search the Department of State Division of Corporation, State Records and UCC website. They have a Corporation and Business Entity Database that has all New York corporation names listed. If you are not ready to file your New York S-Corp today but want to reserve a name to ensure that it is not taken, you can file an Application for Reservation of Name, which will reserve the business name for you for 60 days.
- Make sure it is available as a web domain. This way, you can find out if another company outside of New York has a corporation with the same name. In that case, think of something more original.
Create a Business Website
Creating a website for your New York business is not a New York S-Corp 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.
Begin Operating Your Business
Once you become an official S-Corporation in the state of New York, make sure you keep your S-Corp compliant. Remember all important dates and make all necessary payments on time. Know all of the laws regarding the issuing of stocks. Host all necessary annual meetings. This is mandatory if you don’t want your new business to run into any issues. 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.
Next, make sure you’ve obtained all necessary permits, licenses, and insurances that your NY corp might need—and you’re good to go! Begin operating your New York business with peace of mind, knowing that you are protected by an S-Corp in case anything unforeseeable affects your new business venture.
Begin Operating Your Business
Once you become an official S-Corporation in the state of New York, make sure you keep your S-Corp compliant. Remember all important dates and make all necessary payments on time. Know all of the laws regarding the issuing of stocks. Host all necessary annual meetings.
New Mexico S-Corp
Learn the Benefits of an S-Corp
When you decide to start a business, there are a number of business entities to choose from. Each has its own advantages and disadvantages, which we will introduce to you here. Prospective business owners should consult with professionals, such as a business attorney and accountants, before making the final decision. But educating yourself about the different types of corporations can help you assess what is the right business structure for you beforehand.
But first, are you ready to incorporate? It is advised that you should incorporate when you anticipate taking investments or when your business approaches material size or complexity.
Typically, “material size” means a business with revenue above $100,000. Once you know you’re ready, you have the option between choosing to classify your business as a C-Corporation or an S-Corporation. While S-Corps used to be the way to go for small businesses (it’s even been nicknamed the “Small BusinesS-Corporation”), thanks to the 2017 Tax Cuts and Jobs Act, C-Corps may now offer lower corporate tax rates to smaller business. Now, S-Corps are sometimes advisable for larger businesses. But keep in mind that C-Corps give you more options to expand and raise money, which can be very beneficial to a larger business. You may want to discuss the differences with a financial advisor or lawyer who can help break down all of the costs to help you assess what will work best for you.
Whether you choose to structure your business entity as a C or S-Corporation will determine how much you’ll pay in taxes, the ways you’re permitted to raise money, and the ease with which you can expand as your business grows. The standard and most common type of corporation is a C-Corporation. In fact, a C-Corp is the default type of corporation, and all S-Corps begin as a C-Corp or LLC. When you initially incorporate, your company will automatically become a standard C-Corp, and only after you file multiple forms can you transition to an S-Corp for federal tax purposes.
If there is an issue with a product, an S-Corp protects you. Compensation can only be taken from the S-Corp’s assets, not your personal assets.
Start Your S-Corp NowHow do you know which type of corporation you want to register your business as when they are both so similar? Both types of corporations offer owners protection from individual liability, so shareholders (and directors, officers, and employees) are typically not personally responsible for business debts. C-Corps and S-Corps require similar paperwork. In addition, both are owned by shareholders, have a Board of Directors with annual meetings, and are managed by executive officers. It is also a requirement that both types of corporations pay annual fees, set up bylaws, and issue stock. Basically, an S-Corporation is the legal equivalent of a regular C-Corporation. Both have the same rights. They just pays taxes differently.
But why opt for an S-Corp? What are the benefits of setting up your state of New Mexico business as an S-Corp?
The main difference between a C and S-Corporation is that an S-Corp is not treated as a disregarded entity. It is a pass-through tax entity. While a C-Corp’s tax attributes are determined at the entity level, an S-Corp determines its own income, deductions, credits, etc. It spreads out the tax attributes among its owners (or to its sole owner) as part of shared ownership. Likewise, within an S-Corporation, the profits are passed on to the shareholders, who are then taxed based on their personal returns. Unlike a C-Corporation, an S-Corporation is required to file an annual information tax return. A few other differences are that S-Corps must have no more than 100 shareholders (all individuals, not corporations), have only one class of stock, and be owned by U.S. citizens or resident aliens.
There are advantages to establishing an S-Corp in New Mexico. Registering as an S-Corporation offers you:
- The ability to operate as a corporation even if the owner leaves the company or passes away.
- Pass-through taxation, as owners report their share of the profits and losses on their individual tax returns.
- A way out of being taxed twice, the way you would be in a C-Corporation. There is no double taxation occurring--once as income and again as dividend income. You save more money!
- The opportunity to issue shares of stock to increase the value of your business.
- A deduction of 20% of all S-Corp income on your personal tax return, which can significantly reduce your tax burden.
- The ability to write off the S-Corp’s losses on shareholders’ individual tax returns.
- Annual tax filing requirements, unlike C-Corps which must file every quarter.
- Corporate status, which means shareholders, directors, and officers are protected from sharing liability as long as there is no evidence of fraud or other misdeeds
But there are a few disadvantages to starting an S-Corp. One of those is the fact that, unlike a C-Corp, there are restrictions on ownership if you start a New Mexico S-Corp. S-Corporations can only be owned by United States citizens or resident aliens. Additionally, an S-Corp permits only 100 shareholders, while for a C-Corp, there is no limit. But overall, the benefits far outweigh the setbacks, and an S-Corporation is an excellent choice for many entrepreneurs looking to start a business in New Mexico.
Learn the Benefits of an S-Corp
Educating yourself about the different types of corporations can help you assess what is the right business structure for you. It is advised that you should incorporate when you anticipate taking investments or when your business approaches material size or complexity.
Decide on a Registered Agent
Just like the New Mexico LLC formation process, an S-Corp will also need to figure out who the Registered Agent for the corporation should be. The State of New Mexico requires every corporation in the state to have one. This enables the state to ensure the delivery of legal mail and that court documents can be tracked appropriately. The Registered Agent will also act as the contact point between the New Mexico Secretary of State and the corporation. Once you assign someone as your Registered Agent, they can receive official correspondence and documents on behalf of your business.
A Registered Agent can be either an individual who is a resident of New Mexico 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. Your Registered Agent’s information would go on your most important New Mexico Secretary of State corporation forms.
- Possess a physical street address located in New Mexico (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 New Mexico Registered 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 Kentucky’s Secretary of State 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. An alternative you can look into is hiring a New Mexico Registered Agent Service. We also offer a Registered Agent Service for a small charge that you can include as an add-on to your shopping cart.
Decide on a Registered Agent
Just like the New Mexico LLC formation process, an S-Corp will also need to figure out who the Registered Agent for the corporation should be. The State of New Mexico requires every corporation in the state to have one. This enables the state to ensure the delivery of legal mail and that court documents can be tracked appropriately.
Obtain an Employer
Identification Number
Next, your New Mexico S-corp 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. All corporations require an EIN, even if you don’t have any employees.
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 apply 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.
If you know your S-Corp 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.
Obtain an Employer Identification Number
Next, your New Mexico S-corp 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. All corporations require an EIN, even if you don’t have any employees.
Submit Your
Articles of Incorporation
To create an S-Corp in New Mexico, you will also need to register your business by filling out and submitting the Articles of Incorporation. The Articles of Incorporation is a form that should be filed (and maintained) with the state of New Mexico. It establishes the basic elements of the corporation, such as the name and address of the corporation, the number and classes of stock, and certain indemnification provisions. Prior to filing, the Articles of Incorporation must be signed by each incorporator in order to authenticate it. The document can be repealed or amended with the approval of the Board of Directors.
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 S-Corp 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 New Mexico Articles of Incorporation form is accepted, congratulations! Your company now exists as a recognized legal entity that is authorized to conduct business within the State of New Mexico.
Submit Your Articles of Incorporation
To create an S-Corp in New Mexico, you will also need to register your business by filling out and submitting the Articles of Incorporation. The Articles of Incorporation is a form that should be filed (and maintained) with the state of New Mexico.
Draft Your Corporate Bylaws
First, what are bylaws? If you’ve heard of an Operating Agreement, this is just like that, but “bylaws” is the term usually used when referring to a corporation. There is no set criteria for what your bylaws should look like, but typically, they should set forth internal rules and procedures for your NM S-Corp. Basically, bylaws are rules of operation that create the company’s structure, ensuring that employees, shareholders, and executives are in the loop about how the business will be run.
Key points are covered in the corporate bylaws document, such as when annual meetings will be held, the size of your Board of Directors, and how this form will be amended if need be. In addition, member duties are explained and solutions to common disputes between parties are offered. Voting rights and salaries are discussed, and “what if” scenarios are presented. Having bylaws allows you to set up a structure that works for your business’s unique needs instead of adhering to default regulations within the state.
While bylaws are not required in most states, they are required in New Mexico. It is important to establish a set of bylaws that ensure your business runs smoothly. Filling out and filing this document prior to starting an S-Corporation in New Mexico provides protection for your business.
You can use this corporate bylaws generator to get a sense of what goes into a typical set of bylaws. To ensure it is done correctly, you can have a lawyer look over your bylaws prior to submission to ensure all necessary rules and scenarios are covered. Get legal advice from our partner Rocket Lawyer.
Draft Your Corporate Bylaws
First, what are bylaws? If you’ve heard of an Operating Agreement, this is just like that, but “bylaws” is the term usually used when referring to a corporation.
Elect a Board of Directors
New Mexico law requires one or more director(s). The Board of Directors, while they are not involved in the daily tasks of running a business, represent or govern the corporation. Their duties include handling finances and fulfilling legal requirements, as well as determining the mission of the company.
People who do not work for your company can be a part of your Board of Directors. In fact, many businesses turn to lawyers or other business owners to fill in a spot on their Board of Directors. That way, they receive outside expertise from them, plus they may come with their own additional business contacts.
These board members must adhere to something called “the duty of loyalty,” which means that directors and officers of an S-Corporation can only make decisions without any personal economic conflict. The duty of loyalty is breached if something like a self-interested transaction occurs or a business opportunity is stolen. Plus, there is also the “duty of care” to consider. Members of the Board of Directors must make decisions that are in the best interests of the corporation at all times. For example, making a decision that causes serious losses for the shareholders would mean they are in violation of their duty of care and they can be sued for this.
Your board members will have to hold meetings to make important decisions, such as issuing shares or amending something in the Articles of Incorporation. The Board of Directors typically receives equal voting rights (some states, like Delaware, are an exception) when making these decisions. During the first meeting of the S-Corporation's Board of Directors, directors can appoint officers, decide on bylaws, select a corporate bank, and more. All subsequent meetings must be held annually, though, of course, if more are needed, more can be held.
Minutes of the meeting, which is the recorded documentation of what was discussed or what happened during a meeting, must be recorded to exhibit transparency in business operations, but they do not need to be filed with the state. Instead, these should be kept with your other corporate records, such as Articles of Incorporation and bylaws. These documents should be saved for at least seven years in order to protect your company.
Elect a Board of Directors
First, familiarize yourself with the roles within an S-Corporation. There are three groups:
- Shareholders
- Board of Directors
- Officers
Appoint Corporate Officers
Shareholders and directors only have the ability to make decisions as part of a group, after holding group meetings and taking votes. An individual shareholder or director does not have the power to do anything--if there are multiple shareholders and directors. If a corporation has only one shareholder or director, the decision-making, of course, falls on that person without the need for a group meeting. Officers, on the other hand, do not operate in groups. An officer holding the position of president, chief executive officer, or treasurer, for example, is an agent of the corporation and has the authority to act on behalf of the corporation on his or her own. Within smaller S-Corps, directors are sometimes also officers and shareholders. In that case, even though the same person is serving in multiple roles, each role has very different responsibilities and is treated as such.
Shareholders are the owners of the corporation, and they elect the Board of Directors. The directors, in unison, oversee and direct corporation affairs and make business decisions. They employ officers who carry out the Board of Directors’ decisions. Officers are responsible for the day-to-day operations of the company. An officer can be terminated by the Board of Directors at any time.
New Mexico requirements state that there should be as many officers as stated in the bylaws, but a minimum of one. One person may hold multiple offices. If there are multiple officers, one officer is responsible for maintaining all corporate records.
Appoint Corporate Officers
Shareholders and directors only have the ability to make decisions as part of a group, after holding group meetings and taking votes. An individual shareholder or director does not have the power to do anything - if there are multiple shareholders and directors.
Issue Stock to your Shareholders
One of the benefits of having an S-Corporation is being able to issue shares of stock to raise funds for your business. Shares represent the amount of money invested by the shareholders in the company. Issuing stock to your shareholders allows you to finance your business without relying on debt. Unlike taking out a business loan, you do not pay interest that eats at your profits each month. The value of your business assets can be assessed by taking a look at what amount of your business assets are owned by shareholders vs. lenders. Corporations that have a higher proportion of the company owned by lenders makes an investment in the business appear riskier. If shareholders do invest in your business and purchase stock, keep in mind that if your business fails, you would have to pay back your loans and shareholders.
While there are many advantages to issuing stock, keep in mind that shareholders have an ownership stake in the company. This means that they have certain rights, such as the ability to participate in voting and the assurance that they will be collecting dividends. Profits will be shared and decisions will have to be made in unison. The more stock you issue to shareholders, the smaller your ownership in the business (and the less of a say you have in business major business decisions). On the plus side, when your business grows, you can buy out the other shareholders and get your ownership back.
Issuing stock is not a requirement for S-Corporations, but a privilege that you can make use of if you choose. Doing so can help you fund your business if you are growing and have large, expensive projects planned in the near future. In that case, you can decide how much capital you need and figure out how many shares you’d like to issue and at what price per share. You will already have a number for how many shares you have to offer (that was decided when you filed your Articles of Incorporation). To properly assess the accurate value of each share, determine your company’s net worth first. This will help you figure out what percentage of ownership you believe each share is worth.
Typically, appointed Board of Directors can issue stock whenever and to whomever, as long as the recipient has a brokerage account and is over 18 years old. But within an S-Corp, there are a few more limitations that a C-Corp does not have. While C-Corporations can be owned by any individual or legal entity--foreign or domestic--S-Corporations can only be owned by United States citizens or resident aliens. On top of that, an S-Corp does not allow an unlimited number of shareholders. It maxes out at 100. Also, S-Corps are not permitted to be owned by a C-Corp, another S-Corp, an LLC, a partnership, or many trusts. Lastly, unlike in a C-Corp where shareholders have the option between different stock classes (common, preferred, income, value, growth), an S-Corp only permits one stock class (common).
Another thing that can limit you here is if you’ve chosen to classify your S-Corp as a private corporation. This is typically a smaller corporation where the stock isn't offered to the public. A publiC-Corporation is authorized to sell their stock to the public, while a private company can’t trade its share on public stock exchanges. But a private corporation is not always small. Many big companies are privately held--such as Dell, Koch Industries, Deloitte, and Cargill. It can be harder for private corporations to raise funds, but it can be important in order to maintain family ownership.
Whoever your corporation may sell stock to, it’s important to have a shareholder agreement for protection. This would explain the shareholder’s rights and voting power within the S-Corporation. You will want to decide and let you shareholders know what kind of say they have in the organization or management of the company when they are issued stock. Like most states, New Mexico requires an annual shareholder meeting.
Issue Stock to your Shareholders
One of the benefits of having an S-Corporation is being able to issue shares of stock to raise funds for your business. Shares represent the amount of money invested by the shareholders in the company. Issuing stock to your shareholders allows you to finance your business without relying on debt.
Familiarize Yourself with the
State’s Taxes and Licenses
Income from pass-through entities, such as a New Mexico Limited Liability Company and New Mexico S-Corp, “passes through” the business to the owners, who are required to report this information on their personal tax returns. In that case, each individual S-Corp member would then have to pay taxes on his or her share of the S-Corp’s income. Being a pass-through entity comes in handy here, as that means that the S-Corporation income is not subject to double taxation like C-Corporation income. New Mexico taxes personal income at rates ranging from 1.7% to 4.9%.
There are other taxes that an S-Corp must pay. For example, employers owe a withholding tax. Plus, New Mexico has a sales tax of 5.125%, but this varies per city. New Mexico cities/municipalities can collect taxes at their own rates, which may adjust the 5.125% to 8.938%. More information can be found on the Taxation and Revenue of New Mexico website. Plus, all New Mexico businesses must register with the New Mexico Taxation and Revenue Department and obtain a Combined Reporting System (CRS) identification number.
In addition, there may be extra fees for certain insurances, permits, and licenses. For example, you may need worker’s compensation insurance or a building permit, depending on the state’s laws and the type of business you own. Find out the requirements for S-Corps in the state, county, and city that you plan to run your business in. Each city in New Mexico has its own local requirements. For example, the town of Silver City, NM has a website with a phone number and hours listed so that prospective business owners can either call or stop by in person to request information about any insurances, permits, or licenses they might need to obtain before operating their New Mexico business.
The main benefit of having an NM S-Corp instead of a New Mexico LLC is that your business saves money on self-employment taxes. The owners of an S-Corp do not pay self-employment taxes on salaries they are paid by the corporation.
Familiarize Yourself with the State’s Taxes and Licenses
Income from pass-through entities, such as a New Mexico Limited Liability Company and New Mexico S-Corp, “passes through” the business to the owners, who are required to report this information on their personal tax returns.
File a Biennial Report
Like most states, the State of New Mexico requires all S-Corp owners to file a report that updates all the information that the New Mexico Secretary of State has on file. While most states require this report to be submitted annually for corporations, New Mexico requires a submission biennially--by the 15th day of the fourth month following the close of your fiscal year. You can look up your business’s Biennial Report due date here.
Good news for prospective S-Corp owners in New Mexico: while some states charge over $500 every single year as a required fee that all corporation owners must pay when submitting their Reports, New Mexico requires a fee of only $25 (unlike LLCs, for which there is no report and no New Mexico LLC annual fee) that owners need to pay once every two years when submitting their Biennial Reports.
Online filing is available on the Corporations and Business Services page on the New Mexico Secretary of State website. Filing a Biennial Report is necessary for maintaining an active status after starting an S-Corp in NM. Not filing the report or paying the fee will result in being presented a New Mexico corporation dissolution form, after which the state will dissolve your business.
Biennial Reports can be rather complex–requiring the deciphering of gross receipts, dividends, interest, losses, and all New Mexico corporation fees–and 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.
File a Biennial Report
Like most states, the State of New Mexico requires all S-Corp owners to file a report that updates all the information that the New Mexico Secretary of State has on file.
Raise Funds for Your Corporation
You can’t start a business with zero capital. There are legal fees, document filing fees, taxes, employees to pay, as well as the costs of operating a business. Some of the most commonly-used options for obtaining funding for your S-Corp 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
- Issuing stock to shareholders
Many new S-Corporation 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 people to your team. S-Corporations may have a single person as the company's owner, or an unlimited number of shareholders participating in the ownership of the business. 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 bylaws and ensure that you are still the primary owner of your New Mexico S-Corporation.
Raise Funds for Your S-Corp
You can’t start a business with zero capital. There are legal fees, document filing fees, taxes, employees to pay, as well as the costs of operating a business.
Create a Business Website
Creating a website for your New Mexico 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 S-Corp 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.
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 New Mexico corp name tips:
- Follow S-Corp naming guidelines. A corporation’s name usually has to include words, like Corporation, Incorporated, Company, or Limited; or abbreviations, like Corp., Inc., Co., or Ltd. 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 getting an S-Corp in New Mexico you will need an original name that is not in use by another corporation. To check if a name has already been taken, you can search the New Mexico Name Availability Database. You may reserve a name for 120 days if you came up with a name you want to use but are not ready to file your Articles of Organization just yet. The cost to reserve the name of a corporation in New Mexico is $20.
- Make sure it is available as a web domain. This way, you can find out if another company outside of New Mexico has a corporation with the same name. In that case, think of something more original.
Create a Business Website
Creating a website for your New Mexico business is not a New Mexico S-Corp 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.
Begin Operating Your Business
Once you become an official New Mexico corporation, make sure you keep your S-Corp compliant. Remember all important dates and make all necessary payments on time. Know all of the laws regarding the issuing of stocks. Host all necessary annual meetings. This is mandatory if you don’t want your new business to run into any issues. 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.
Next, make sure you’ve obtained all necessary permits, licenses, and insurances that your NM corp might need—and you’re good to go! Begin operating your New Mexico business with peace of mind, knowing that you are protected by an S-Corp in case anything unforeseeable affects your new business venture.
Begin Operating Your Business
Once you become an official New Mexico corporation, make sure you keep your S-Corp compliant. Remember all important dates and make all necessary payments on time. Know all of the laws regarding the issuing of stocks. Host all necessary annual meetings.
New Jersey S-Corp
Learn the Benefits of an S-Corp
When you decide to start a business, there are a number of business entities to choose from. Each has its own advantages and disadvantages, which we will introduce to you here. Prospective business owners should consult with professionals, such as a business attorney and accountants, before making the final decision. But educating yourself about the different types of corporations can help you assess what is the right business structure for you beforehand.
But first, are you ready to incorporate? It is advised that you should incorporate when you anticipate taking investments or when your business approaches material size or complexity.
Typically, “material size” means a business with revenue above $100,000. Once you know you’re ready, you have the option between choosing to classify your business as a C-Corporation or an S-Corporation. While S-Corps used to be the way to go for small businesses (it’s even been nicknamed the “Small BusinesS-Corporation”), thanks to the 2017 Tax Cuts and Jobs Act, C-Corps may now offer lower corporate tax rates to smaller business. Now, S-Corps are sometimes advisable for larger businesses. But keep in mind that C-Corps give you more options to expand and raise money, which can be very beneficial to a larger business. You may want to discuss the differences with a financial advisor or lawyer who can help break down all of the costs to help you assess what will work best for you.
Whether you choose to structure your business entity as a C or S-Corporation will determine how much you’ll pay in taxes, the ways you’re permitted to raise money, and the ease with which you can expand as your business grows. The standard and most common type of corporation is a C-Corporation. In fact, a C-Corp is the default type of corporation, and all S-Corps begin as a C-Corp or LLC. When you initially incorporate, your company will automatically become a standard C-Corp, and only after you file multiple forms can you transition to an S-Corp for federal tax purposes.
If there is an issue with a product, an S-Corp protects you. Compensation can only be taken from the S-Corp’s assets, not your personal assets.
Start Your S-Corp NowHow do you know which type of corporation you want to register your business as when they are both so similar? Both types of corporations offer owners protection from individual liability, so shareholders (and directors, officers, and employees) are typically not personally responsible for business debts. C-Corps and S-Corps require similar paperwork. In addition, both are owned by shareholders, have a Board of Directors with annual meetings, and are managed by executive officers. It is also a requirement that both types of corporations pay annual fees, set up bylaws, and issue stock. Basically, an S-Corporation is the legal equivalent of a regular C-Corporation. Both have the same rights. They just pays taxes differently.
But why opt for an S-Corp? What are the benefits of setting up your New Jersey business as an S-Corp?
The main difference between a C and S-Corporation is that an S-Corp is not treated as a disregarded entity. It is a pass-through tax entity. While a C-Corp’s tax attributes are determined at the entity level, an S-Corp determines its own income, deductions, credits, etc. It spreads out the tax attributes among its owners (or to its sole owner) as part of shared ownership. Likewise, within an S-Corporation, the profits are passed on to the shareholders, who are then taxed based on their personal returns. Unlike a C-Corporation, an S-Corporation is required to file an annual information tax return. A few other differences are that S-Corps must have no more than 100 shareholders (all individuals, not corporations), have only one class of stock, and be owned by U.S. citizens or resident aliens.
There are advantages to establishing an S-Corp in New Jersey. Registering as an S-Corporation offers you:
- The ability to operate as a corporation even if the owner leaves the company or passes away.
- Pass-through taxation, as owners report their share of the profits and losses on their individual tax returns.
- A way out of being taxed twice, the way you would be in a C-Corporation. There is no double taxation occurring--once as income and again as dividend income. You save more money!
- The opportunity to issue shares of stock to increase the value of your business.
- A deduction of 20% of all S-Corp income on your personal tax return, which can significantly reduce your tax burden.
- The ability to write off the S-Corp’s losses on shareholders’ individual tax returns.
- Annual tax filing requirements, unlike C-Corps which must file every quarter.
- Corporate status, which means shareholders, directors, and officers are protected from sharing liability as long as there is no evidence of fraud or other misdeeds
But there are a few disadvantages to starting an S-Corp. One of those is the fact that, unlike a C-Corp, there are restrictions on ownership if you start a New Jersey S-Corp. S-Corporations can only be owned by United States citizens or resident aliens. Additionally, an S-Corp permits only 100 shareholders, while for a C-Corp, there is no limit. But overall, the benefits far outweigh the setbacks, and an S-Corporation is an excellent choice for many entrepreneurs looking to start a business in New Jersey.
Learn the Benefits of an S-Corp
Educating yourself about the different types of corporations can help you assess what is the right business structure for you. It is advised that you should incorporate when you anticipate taking investments or when your business approaches material size or complexity.
Decide on a Registered Agent
Next, figure out who the Registered Agent for the corporation should be. The State of New Jersey requires every corporation in the state to have one. This enables the state to ensure the delivery of legal mail and that court documents can be tracked appropriately. The Registered Agent will also act as the contact point between the New Jersey Department of State and the corporation. Once you assign someone as your Registered Agent, they can receive official correspondence and documents on behalf of your business.
A Registered Agent can be either an individual who is a resident of New Jersey 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. Your Registered Agent’s information would go on your most important New Jersey Department of State corporation forms.
- Possess a physical street address located in New Jersey (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 New Jersey Registered 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 New Jersey’S-Corporation 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. An alternative you can look into is hiring a New Jersey Registered Agent Service. We also offer a Registered Agent Service for a small charge that you can include as an add-on to your shopping cart.
Decide on a Registered Agent
Next, figure out who the Registered Agent for the corporation should be. The State of New Jersey requires every corporation in the state to have one. This enables the state to ensure the delivery of legal mail and that court documents can be tracked appropriately. legal mail and that court documents can be tracked appropriately.
Obtain an Employer
Identification Number
Next, your S-Corp 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. All corporations require an EIN, even if you don’t have any employees.
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 apply 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.
If you know your S-Corp 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.
Obtain an Employer Identification Number
Next, your S-Corp 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. All corporations require an EIN, even if you don’t have any employees.
Submit Your
Articles of Incorporation
To create an S-Corp in New Jersey, you will also need to register your business by filling out and submitting the Articles of Incorporation. The Articles of Incorporation is a form that should be filed (and maintained) with the state of New Jersey. It establishes the basic elements of the corporation, such as the name and address of the corporation, the number and classes of stock, and certain indemnification provisions. Prior to filing, the Articles of Incorporation must be signed by each incorporator in order to authenticate it. The document can be repealed or amended with the approval of the Board of Directors.
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 S-Corp 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 New Jersey Articles of Incorporation form is accepted, congratulations! Your company now exists as a recognized legal entity that is authorized to conduct business within the State of New Jersey.
Submit Your Articles of Incorporation
To create an S-Corp in New Jersey, you will also need to register your business by filling out and submitting the Articles of Incorporation. The Articles of Incorporation is a form that should be filed (and maintained) with the state of New Jersey.
Draft Your Corporate Bylaws
First, what are bylaws? If you’ve heard of an Operating Agreement, this is just like that, but “bylaws” is the term usually used when referring to a corporation. There is no set criteria for what your bylaws should look like, but typically, they should set forth internal rules and procedures for your NJ S-Corp. Basically, bylaws are rules of operation that create the company’s structure, ensuring that employees, shareholders, and executives are in the loop about how the business will be run.
Key points are covered in the corporate bylaws document, such as when annual meetings will be held, the size of your Board of Directors, and how this form will be amended if need be. In addition, member duties are explained and solutions to common disputes between parties are offered. Voting rights and salaries are discussed, and “what if” scenarios are presented. Having bylaws allows you to set up a structure that works for your business’s unique needs instead of adhering to default regulations within the state.
While bylaws are not required in some states, they are required in New Jersey. It is important to establish a set of bylaws that ensure your business runs smoothly. Filling out and filing this document prior to starting an S-Corporation in New Jersey provides protection for your business.
You can use this corporate bylaws generator to get a sense of what goes into a typical set of bylaws. To ensure it is done correctly, you can have a lawyer look over your bylaws prior to submission to ensure all necessary rules and scenarios are covered. Get legal advice from our partner Rocket Lawyer.
Draft Your Corporate Bylaws
First, what are bylaws? If you’ve heard of an Operating Agreement, this is just like that, but “bylaws” is the term usually used when referring to a corporation.
Elect a Board of Directors
New Jersey law requires one or more director(s). The Board of Directors, while they are not involved in the daily tasks of running a business, represent or govern the corporation. Their duties include handling finances and fulfilling legal requirements, as well as determining the mission of the company.
People who do not work for your company can be a part of your Board of Directors. In fact, many businesses turn to lawyers or other business owners to fill in a spot on their Board of Directors. That way, they receive outside expertise from them, plus they may come with their own additional business contacts.
These board members must adhere to something called “the duty of loyalty,” which means that directors and officers of an S-Corporation can only make decisions without any personal economic conflict. The duty of loyalty is breached if something like a self-interested transaction occurs or a business opportunity is stolen. Plus, there is also the “duty of care” to consider. Members of the Board of Directors must make decisions that are in the best interests of the corporation at all times. For example, making a decision that causes serious losses for the shareholders would mean they are in violation of their duty of care and they can be sued for this.
Your board members will have to hold meetings to make important decisions, such as issuing shares or amending something in the Articles of Incorporation. The Board of Directors typically receives equal voting rights (some states, like Delaware, are an exception) when making these decisions. During the first meeting of the S-Corporation's Board of Directors, directors can appoint officers, decide on bylaws, select a corporate bank, and more. All subsequent meetings must be held annually, though, of course, if more are needed, more can be held.
Minutes of the meeting, which is the recorded documentation of what was discussed or what happened during a meeting, must be recorded to exhibit transparency in business operations, but they do not need to be filed with the state. Instead, these should be kept with your other corporate records, such as Articles of Incorporation and bylaws. These documents should be saved for at least seven years in order to protect your company.
Elect a Board of Directors
First, familiarize yourself with the roles within an S-Corporation. There are three groups:
- Shareholders
- Board of Directors
- Officers
Appoint Corporate Officers
Shareholders and directors only have the ability to make decisions as part of a group, after holding group meetings and taking votes. An individual shareholder or director does not have the power to do anything--if there are multiple shareholders and directors. If a corporation has only one shareholder or director, the decision-making, of course, falls on that person without the need for a group meeting. Officers, on the other hand, do not operate in groups. An officer holding the position of president, chief executive officer, or treasurer, for example, is an agent of the corporation and has the authority to act on behalf of the corporation on his or her own. Within smaller S-Corps, directors are sometimes also officers and shareholders. In that case, even though the same person is serving in multiple roles, each role has very different responsibilities and is treated as such.
Shareholders are the owners of the corporation, and they elect the Board of Directors. The directors, in unison, oversee and direct corporation affairs and make business decisions. They employ officers who carry out the Board of Directors’ decisions. Officers are responsible for the day-to-day operations of the company. An officer can be terminated by the Board of Directors at any time.
New Jersey requirements state that all S-Corps must have a President, Secretary, and Treasurer on the Board of Directors.
Appoint Corporate Officers
Shareholders and directors only have the ability to make decisions as part of a group, after holding group meetings and taking votes. An individual shareholder or director does not have the power to do anything - if there are multiple shareholders and directors.
Issue Stock to your Shareholders
One of the benefits of having an S-Corporation is being able to issue shares of stock to raise funds for your business. Shares represent the amount of money invested by the shareholders in the company. Issuing stock to your shareholders allows you to finance your business without relying on debt. Unlike taking out a business loan, you do not pay interest that eats at your profits each month. The value of your business assets can be assessed by taking a look at what amount of your business assets are owned by shareholders vs. lenders. Corporations that have a higher proportion of the company owned by lenders makes an investment in the business appear riskier. If shareholders do invest in your business and purchase stock, keep in mind that if your business fails, you would have to pay back your loans and shareholders.
While there are many advantages to issuing stock, keep in mind that shareholders have an ownership stake in the company. This means that they have certain rights, such as the ability to participate in voting and the assurance that they will be collecting dividends. Profits will be shared and decisions will have to be made in unison. The more stock you issue to shareholders, the smaller your ownership in the business (and the less of a say you have in business major business decisions). On the plus side, when your business grows, you can buy out the other shareholders and get your ownership back.
Issuing stock is not a requirement for S-Corporations, but a privilege that you can make use of if you choose. Doing so can help you fund your business if you are growing and have large, expensive projects planned in the near future. In that case, you can decide how much capital you need and figure out how many shares you’d like to issue and at what price per share. You will already have a number for how many shares you have to offer (that was decided when you filed your Articles of Incorporation). To properly assess the accurate value of each share, determine your company’s net worth first. This will help you figure out what percentage of ownership you believe each share is worth.
Typically, appointed Board of Directors can issue stock whenever and to whomever, as long as the recipient has a brokerage account and is over 18 years old. But within an S-Corp, there are a few more limitations that a C-Corp does not have. While C-Corporations can be owned by any individual or legal entity--foreign or domestic--S-Corporations can only be owned by United States citizens or resident aliens. On top of that, an S-Corp does not allow an unlimited number of shareholders. It maxes out at 100. Also, S-Corps are not permitted to be owned by a C-Corp, another S-Corp, an LLC, a partnership, or many trusts. Lastly, unlike in a C-Corp where shareholders have the option between different stock classes (common, preferred, income, value, growth), an S-Corp only permits one stock class (common).
Another thing that can limit you here is if you’ve chosen to classify your S-Corp as a private corporation. This is typically a smaller corporation where the stock isn't offered to the public. A publiC-Corporation is authorized to sell their stock to the public, while a private company can’t trade its share on public stock exchanges. But a private corporation is not always small. Many big companies are privately held--such as Dell, Koch Industries, Deloitte, and Cargill. It can be harder for private corporations to raise funds, but it can be important in order to maintain family ownership.
Whoever your corporation may sell stock to, it’s important to have a shareholder agreement for protection. This would explain the shareholder’s rights and voting power within the S-Corporation. You will want to decide and let you shareholders know what kind of say they have in the organization or management of the company when they are issued stock. New Jersey requires an annual shareholder meeting.
Issue Stock to your Shareholders
One of the benefits of having an S-Corporation is being able to issue shares of stock to raise funds for your business. Shares represent the amount of money invested by the shareholders in the company. Issuing stock to your shareholders allows you to finance your business without relying on debt.
Familiarize Yourself with the
State’s Taxes and Licenses
Typically, income from pass-through entities, such as a New Jersey Limited Liability Company and New Jersey S-Corp, “passes through” the business to the owners, who are required to report this information on their personal tax returns. In that case, each individual S-Corp member would then have to pay taxes on his or her share of the S-Corp’s income. But New Jersey does not recognize the federal S election. New Jersey S-Corporations owe federal tax and must also pay corporation business tax based on New Jersey gross receipts. In addition to that, individual S-Corp shareholders will have to pay tax on their share of the company’s net income.
New Jersey taxeS-Corporate income via a tax called the Corporation Business Tax (CBT). The CBT is based on whichever is greater--a graduated tax based on entire net income, an alternative minimum assessment (AMA) based on gross receipts, or an AMA based on gross profits. The state does not have any franchise or privilege tax. More details on New Jersey business taxes can be found on the State of New Jersey Department of the Treasury website.
Plus, some states charge the corporation other various taxes. For example, employers owe payroll tax on their employees’ wages. Also, the State of New Jersey has a sales and use tax that anyone with a business that sells products or services must pay. You can find more information on both of these taxes on the State of New Jersey Business Portal: Tax Center. Other taxes are listed here.
In addition, there may be extra fees for certain insurances, permits, and licenses, depending on the state’s laws and the type of business you own. For example, you may need worker’s compensation, unemployment insurance, building permits, etc. Most New Jersey licenses and permits can be found here. Find out the requirements for S-Corps 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
Typically, income from pass-through entities, such as a New Jersey Limited Liability Company and New Jersey S-Corp, “passes through” the business to the owners, who are required to report this information on their personal tax returns.
File an Annual Report
Like most states, the State of New Jersey requires all S-Corp owners to file an Annual Report that updates all the information that the State of New Jersey has on file. The report is due by the end of the registration anniversary month. A $75 report fee is due with it, plus a $3 filing fee. New Jersey S-Corp online Annual Report filing is available on the State of New Jersey Division of Revenue and Enterprise Services: Annual Reports and Change Services website. Filing an Annual Report is necessary for maintaining an active status after starting an S-Corp in NJ. Not filing the report or paying the fee will result in being presented a New Jersey corporation dissolution form, after which the state will dissolve your business.
Annual Reports can be rather complex–requiring the deciphering of gross receipts, dividends, interest, losses, and all New Jersey corp fees–and 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.
File an Annual Report
Like most states, the State of New Jersey requires all S-Corp owners to file an Annual Report that updates all the information that the State of New Jersey has on file. The report is due by the end of the registration anniversary month.
Raise Funds for Your Corporation
You can’t start a business with zero capital. There are legal fees, document filing fees, taxes, employees to pay, as well as the costs of operating a business. Some of the most commonly-used options for obtaining funding for your S-Corp 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
- Issuing stock to shareholders
Many new S-Corporation 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 people to your team. S-Corporations may have a single person as the company's owner, or an unlimited number of shareholders participating in the ownership of the business. 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 bylaws and ensure that you are still the primary owner of your New Jersey S-Corporation.
Raise Funds for Your S-Corp
You can’t start a business with zero capital. There are legal fees, document filing fees, taxes, employees to pay, as well as the costs of operating a business.
Create a Business Website
Creating a website for your New Jersey 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 S-Corp 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.
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 New Jersey corporation name tips:
- Follow S-Corp naming guidelines. A corporation’s name usually has to include words, like Corporation, Incorporated, Company, or Limited; or abbreviations, like Corp., Inc., Co., or Ltd. 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 S-Corporation in the State of New Jersey, you will need an original name that is not in use by another corporation. To check if a name has already been taken, you can search the Business Name Search Database. If you are not ready to file your New Jersey S-Corp today but want to reserve a name to ensure that it is not taken, you can file a Business Name Reservation Form along with a $50, which will reserve the business name for you for 120 days.
- Make sure it is available as a web domain. This way, you can find out if another company outside of New Jersey has a corporation with the same name. In that case, think of something more original.
Create a Business Website
Creating a website for your New Jersey business is not a New Jersey S-Corp 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.
Begin Operating Your Business
Once you become an official S-Corporation in the state of New Jersey, make sure you keep your S-Corp compliant. Remember all important dates and make all necessary payments on time. Know all of the laws regarding the issuing of stocks. Host all necessary annual meetings. This is mandatory if you don’t want your new business to run into any issues. 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.
Next, make sure you’ve obtained all necessary permits, licenses, and insurances that your NJ corp might need—and you’re good to go! Begin operating your New Jersey business with peace of mind, knowing that you are protected by an S-Corp in case anything unforeseeable affects your new business venture.
Begin Operating Your Business
Once you become an official S-Corporation in the state of New Jersey, make sure you keep your S-Corp compliant. Remember all important dates and make all necessary payments on time. Know all of the laws regarding the issuing of stocks. Host all necessary annual meetings.