S Corporation FAQs

What is an S corporation?

An S corporation is a corporation that has elected a special tax status with the Internal Revenue Service (IRS). The formation requirements for an S corporation are the same as those for a C corporation. Incorporation documents, typically called the Articles of Incorporation or Certificate of Incorporation, must be filed with the appropriate state agency and the necessary state filing fees paid. After the incorporation with the state is complete, the corporation applies for federal S corporation status by filing Form 2553 with the IRS.

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What paperwork is required to form an S corp?

To form an S corp, you must prepare and file Articles of Incorporation or a Certificate of Incorporation with the proper state authorities. You must also pay filing fees and any applicable initial franchise taxes or other fees. The type and amount of information required in the incorporation documents varies by state. If you incorporate through BizFilings, simply complete our online order form or place an order by phone, and we prepare and file your Articles of Incorporation.

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Who can form an S corporation?

There are no restrictions as to who can form a corporation. There is no age, residency or other legal requirement. Some states do require that the directors of a corporation be a certain age however, typically 18 or older. View the Corporation Formation Requirements page of our state guides for the requirements of your particular state.

However, when Form 2553 is filed with the Internal Revenue Service (IRS) to elect S corporation status, there are restrictions imposed on the ownership of the corporation.

  • S corporations can have no more than 100 shareholders, and all shareholders must all consent in writing to the S corporation election.
  • Shareholders cannot be non-resident aliens.
  • S corporations can have only one class of stock (disregarding voting rights).
  • S corporations cannot have C corporations, other S corporations, LLCs, partnerships or many trusts as shareholders.
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Do I need an attorney to incorporate my business?

No. You can prepare and file the Articles of Incorporation yourself, but you should understand the corporation formation requirements of your intended state of incorporation.

You can use BizFilings' service to incorporate your business and save money on attorney fees. If you are unsure if incorporation will benefit your business, or what business type you should choose, you should consult an attorney or accountant.

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What should I name my S corporation?

Think carefully about names for your S corporation. It is important for your company name to project the image you want for your new business. In terms of state requirements, the name you select must not be “deceptively similar” to any existing business name in that state and must be “distinguishable on the record” of your state. It is possible that the name you select will not be available in your desired state of incorporation. That’s why we ask for a second name choice on our incorporation order form. Also, the name you choose must show your business is incorporated. Most states require that the name be followed by an ending such as "Incorporated," "Corporation," or an abbreviation such as "Inc." or "Corp." For details on state name requirements for corporations, view the Corporation Formation Requirements page of our state guides.

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What is pass-through taxation?

With pass-through taxation, no corporate tax is paid on company profits, instead those profits are "passed through" and reported on the owners' individual tax returns. Any tax due is then paid by the owners at their individual tax rate. For S corporations, an informational corporate tax return is filed with the IRS (Form 1120S), but no tax is paid at the business level. As noted above, the corporation's profit or loss is reported on the owners’ personal tax returns, and any tax due is paid at the individual level. Because S corporations have pass-through taxation, the possibility of double taxation that occurs with C corporations is eliminated.

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What are authorized shares of stock?

S corporations must indicate the number of shares of stock they want to authorize (and a par value associated with each share) in the Articles of Incorporation. The number of authorized shares is the total number of shares available for an S corporation to issue to shareholders; however the S corporation does not need to issue the total number of authorized shares. Some opt to hold unissued shares in order to add additional owners at a later date or increase the ownership percentage for a current shareholder. An issued share of stock shows ownership in the S corporation and each shareholder obtains a certificate representing the ownership value of the S corporation. Companies can alter the number of authorized shares or the par value of shares at anytime by filing a share amendment with the state.

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What is a share’s par value?

The par value of a share of stock is its minimum stated value. Par value typically does not correlate to the actual value of a share. Common par values are $0.01, $1.00 or no par. The actual value of a share is its fair market value, or what someone is willing to pay for a share of stock. For public companies, actual value is determined by the price investors are willing to pay for each share on the national exchange. For private companies, it is typically determined by the overall value of the corporation or the book value.

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What is the organizational structure of an S corporation?

The organizational structure of an S corporation includes three groups: shareholders, directors and officers. An S corporation is owned by shareholders; however, they do not typically directly manage the company. Instead, they influence corporate decisions through electing and removing directors, approving or disapproving amendments to the Articles of Incorporation and voting on major corporate issues.

The directors, who comprise the “board of directors,” are responsible for managing the affairs of the S corporation. They usually make only major business decisions, and appoint and supervise officers, who make the day-to-day business decisions.

Officers are responsible for the everyday company management.

Note: A shareholder may serve on the board of directors and as an officer. In fact, most states allow S corporations to have only one shareholder, who also serves as the sole director and officer. This is very common for S corporations who only have one or a few shareholders.

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How many directors do I need to form an S corporation?

Only one director is required in most states, but you are allowed to have more. Some states use the number of shareholders in the S corporation to determine the minimum number of directors. For example, if the number of shareholders is three, then the S corporation must have three directors. If the company has less than three shareholders, then the number of directors may equal the number of shareholders. For details on state requirements, view the Corporation Formation Requirements page of our state guides.

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Where should I incorporate my business?

Once you’ve decided to incorporate, and chosen which business entity you will form, the next step is to decide where to incorporate. It is not a requirement to incorporate in the state where your company is physically located (which is considered your home state), but there are factors to consider when evaluating which state is best. For small businesses, two factors are typically considered when deciding where to form an S corporation: the cost of forming in the home state versus the cost of forming in another state and the taxation and ongoing corporate requirements of the states under consideration.

1. Home state incorporation versus foreign qualification

If the S corporation is a closely held corporation, meaning it has one or few shareholders, and does business primarily within a single state; incorporation within the home state is often preferable. The cost of home state incorporation will usually be less than incorporating in another state and registering to do business (foreign qualifying) in your home state.

A corporation that foreign qualifies to do business in another state is subject to taxes and annual report fees from both the state of incorporation and the state of qualification. Another disadvantage of incorporating outside of your home state is the possibility of having to defend a lawsuit in another state.

2. Corporation requirements and taxation

When deciding where to incorporate, it’s also good to research that state’s ongoing corporate requirements (such as annual report and franchise tax requirements) as well as general state taxation requirements. View the Ongoing Corporation Requirements page of our state guides to learn more about these requirements in each state.

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What is a publication requirement?

A few states require notice to be published in a newspaper that a corporation has been formed in that state. States with this requirement for S corporations include: Arizona, Georgia, Nebraska and Pennsylvania. BizFilings can help you satisfy the publication requirement in these states.

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How do I get started with the incorporation process?

After choosing your business type, Articles of Incorporation must be filed with the state government and initial fees must be paid. After your Articles of Incorporation are filed, you need to file Form 2553 with the IRS to elect S corporation status for your company. With BizFilings’ Basic and Standard Incorporation Services, we will provide Form 2553 to you for you to finalize and submit to the IRS. Our Complete Incorporation Service includes an S Corporation Obtainment Service, where we interact with the IRS on your behalf to obtain S corporation status for your company.

Additionally, your S corporation must hold an organizational meeting (initial meeting of directors) where you adopt bylaws and undertake other initial corporate actions (such as appointing officers and approving a resolution to open a business bank account). You should distribute stock certificates to shareholders and record these transactions in the company’s stock transfer ledger. The actions of the organizational meeting should be documented and kept along with the Articles of Incorporation and bylaws in a corporate record book. Our Compliance Kit & Seal, which is included in our Standard and Complete Incorporation Services, has all the items necessary for holding and documenting the organizational meeting.

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Do I have to include a registered agent?

Yes. The name and address of the registered agent is included in your incorporation documents. In some states, the registered agent must also sign your incorporation documents.

The registered agent is responsible for receiving important legal and tax documents on behalf of the business. BizFilings provides Registered Agent Service to our customers. As your registered agent, BizFilings not only satisfies your state's legal requirement but also provides a number of benefits at no additional charge to you, such as: our monthly Registered Agent Watch email, access to BizComply─our online compliance management tool, electronic Service of Process delivery, online access to your account and more.

Having BizFilings as your registered agent is extremely beneficial if you:

  • Want to avoid the risk of non-compliance. States impose ongoing requirements on the businesses incorporated there. Business compliance matters are not likely to be your area of expertise, or interest. As your compliance partner, BizFilings will help you stay in compliance with state requirements for S corporations, avoid unnecessary state penalty fees and maintain your company's good standing in your state of incorporation and/or qualification.
  • Value privacy. When a corporation receives a Service of Process (the document that initiates a lawsuit), it is often delivered by local law enforcement. Having police officers show up in front of customers, employees or neighbors (in the case of a home-based business) is typically something that business owners want to avoid. Having BizFilings as your registered agent service provider ensures you receive any Service of Process promptly and privately.
  • Don't maintain normal business hours. The registered agent for a business must be available during normal business hours to accept important documents as they are delivered. If you are often on the go or work irregular business hours, having BizFilings as your registered agent ensures that you never miss these important communications.
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Can BizFilings be the registered agent for my S corporation?

Yes. BizFilings includes Registered Agent Service in our three S corp formation package options. By including this service, BizFilings both fulfills the legal requirement for your corporation to have a registered agent and provides your business with ongoing compliance assistance. With your incorporation order, you receive our Registered Agent Service for 6 months free and avoid interruption of this valuable service with our convenient auto-renewal program. At the time of renewal, you can choose to renew your company’s Registered Agent Service yearly for $167, two years for $249 (save $129) or three years for $348 (save $219). This helps ensure your company remains in good standing with the state.

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What is BizFilings' Rush Filing Service?

BizFilings' Rush Filing Service allows customers forming an S corporation in certain states to decrease their filing timeframe to 24- to 48-hours.

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Is Rush Filing available for every state?

No. BizFilings’ Rush Filing Service for S corporations is available in the states listed in the chart below. The turnaround time listed adjacent to each state is the time it will take us to receive verification that your incorporation documents have been filed with the state, following the name approval or consent. The turnaround time excludes weekends and holidays. Total time for receiving your state-approved incorporation documents from the state and returning them to you may take around a week after verification.

State Turnaround Time State Turnaround Time
Alaska 24 hours Massachusetts 24 hours
Arkansas 24 hours Michigan 48 hours
California 48 hours Montana 24 hours
Colorado 24 hours Nevada 48 hours
Connecticut 48 hours New Mexico 48 hours
Delaware 24 hours New York 24 hours
Florida 24 hours North Carolina 48 hours
Hawaii 48 hours Ohio 48 hours
Kansas 24 hours Texas 24 hours
Maryland 48 hours Virginia 48 hours
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With Rush Filing Service, how soon will I receive my documents?

The 24- or 48-hour filing time is for the approval of the incorporation only. It typically takes longer for states to produce the filed Articles of Incorporation. Once BizFilings receives your incorporation documents from the state, we will ship them to you via FedEx Overnight delivery. This means you should have your documents in hand anywhere from just a few days to one week after filing. We will also scan and make them available in our Online Status Center for you to access before receiving the originals.

Note: Some states require your signature on the Articles of Incorporation when someone other than BizFilings is acting as registered agent. In these cases, the filing timeframe of 24 to 48 hours begins after we have received the signed documents and received any applicable approvals or consent needed prior to sending the incorporation documents to the state.

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Why should I include Rush Filing Service with my incorporation order?

Using BizFilings' Rush Filing Service secures your name and incorporation date in as little as 24 hours. This service is particularly valuable when you need proof of incorporation to secure a contract or open a bank account.

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