How to Register an S Corporation

Introduction

If you're ready to start your own business, you may want to consider starting an S corporation. This is a popular choice among small businesses because it offers a clear division of responsibility between owners and the corporation itself, which keeps personal assets safe in case something goes wrong with the company. Here is what you need to know in order to register an S corporation.

Draft the Articles of Incorporation

The first thing you'll need to do is draft the articles of incorporation. This document outlines the purpose of your business and sets forth how it will be run. You can also include information about its owners, officers and directors in this document.

File Form 2553 with the IRS

To register your S corporation with the IRS, you'll need to file Form 2553. This two-page form must be filed within 75 days of incorporating, and can be filed online or by mail. If you use the paper version of Form 2553 and mail it in, make sure to allow extra time for delivery—the IRS has a habit of sending back incorrect forms due to errors in their database (which is one reason why we recommend filing electronically).

File a Certificate of Incorporation

The certificate of incorporation is filed with the state and serves as a public document that establishes your corporation. It also provides the legal name of your business, which must be distinguishable from other corporations registered in that state.

Write a Shareholders' Agreement

By writing a shareholders' agreement and having it signed by all of your co-shareholders, you can avoid the confusion that may arise when there are disputes among shareholders. A shareholders' agreement should include:

• Terms for distributions, dividends and buybacks—if any.
• Terms for mergers or buyouts—if any.

Create Corporate Bylaws

For an S corporation, the bylaws establish how you will operate. You have to decide how to make decisions and when meetings are held. You also need to decide who can vote at those meetings, who manages the corporation's books and records, and what happens if someone leaves or is removed from their position as a director of the company. You should also include provisions for amending your bylaws (changing them) and removing directors if necessary. Finally, there may be some financial considerations associated with issuing stock certificates for your company.

Issue Stock Certificates

If you're going to be issuing stock certificates to shareholders, make sure that you issue them in the name of the shareholder. This is important for a couple of reasons: one, it makes it easier for people to identify their shares; and two, it prevents any individual from transferring ownership of those shares without first obtaining all parties' signatures on another piece of paper.

Conclusion

The process for registering an S corporation can be complex, but it is well worth the effort. Once you are registered and have your EIN, you will be able to open a bank account in your business’ name and file taxes on a corporate level.