An S corporation is a specific type of corporation formation that chooses to be taxed under Subchapter S regulations in the tax code. To qualify for S corporation structure and taxation, you’ll first need to create a limited liability company (LLC) or corporation.
There are a variety of benefits to choosing an S corp structure for your Florida business. S corps get limited liability protections, meaning they’re treated as separate legal entities. Shareholders of S corps are protected from the debts and liabilities of the company, so they do not have to worry about being held legally liable for the corporation’s actions unless they themselves either commit a criminal offense or do not uphold the corporation’s rules. They are protected from bankruptcy as well.
There are also a variety of tax advantages. S corps do not pay federal income tax, but may pay tax on passive capital gains. Profits can be passed to shareholders, and those will be taxed at an individual’s income tax rate. These corporations are easily transferred, and can continue indefinitely.
Here’s a quick look at how to set up an S corp in Florida:
- Choose your company name: You’ll need a unique, distinguishable name for your business that is available with Florida’s Department of State Division of Corporations. The name must not appear to be a government agency or charity, and you should search with the U.S. Patent and Trademark Office before applying if you will use your business as a domain name, trade name or trademark.
- Articles of incorporation: You will need to develop and submit articles of incorporation with the Florida Secretary of State. Information to provide here includes:
- A statement of purpose, which documents why you are establishing the corporation and what its primary purpose will be.
- Initial members of the corporation and their voting rights.
- The board of directors, who are nominated to guide the organization. Board directors may need to be voted by company shareholders.
- Meeting information, including when and how shareholder meetings will occur.
- Stock information, explaining how it will be issued, who will receive it and how it can be transferred.
- Officers and their names and responsibilities. Roles may include president, vice president, chief financial officer, chief executive officer and treasurer.
- Bylaws, which outline how your company will be structured and operated.
- Reporting and information about the annual reporting requirements you will meet and who will be responsible for making those reports.
- Applications for important documents: You will need to apply for various certificates, identification numbers and a business license to be able to operate in Florida. The certificates you need will depend on the type of business you intend to operate.
- EIN: If you will have employees, you must get an employer identification number (EIN) from the IRS.
- Share distribution: You will need to create stock certificates and distribute these to your company’s shareholders.
Categorised in: Corporate Law