5 Essential Steps to Start Your S Corp Today

Jul 14, 2025 - 15:08
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5 Essential Steps to Start Your S Corp Today

Starting an S Corporation can seem intimidating, but breaking it down into five vital steps makes the process manageable. First, you need a unique business name that meets state regulations. Next, you’ll file Articles of Incorporation to formally establish your business. After that, obtaining an Employer Identification Number (EIN) is important for tax purposes. Once you elect S Corp status, applying for the necessary licenses and permits guarantees you’re operating legally. Let’s explore these steps in detail.

Key Takeaways

  • Choose a unique business name and check for availability, ensuring it meets state naming rules.
  • File Articles of Incorporation with necessary details to establish your corporation legally.
  • Obtain an Employer Identification Number (EIN) from the IRS for tax identification and employee hiring.
  • Elect S Corp status by filing IRS Form 2553 with all shareholder signatures within the required timeframe.
  • Apply for any necessary licenses and permits specific to your business type and location.

Choose a Unique Business Name

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Choosing a unique business name is a crucial first step in starting your S Corporation. To create an S Corp in California, you need to select a name that isn’t already registered.

Check the availability on your local Secretary of State’s website. Make sure your chosen name complies with state naming rules, which means avoiding profanity or misleading terms, and including designations like “Corporation,” “Incorporated,” or abbreviations such as “Corp.” or “Inc.”

If you plan to operate under a different name, consider using a “doing business as” (DBA) name. You can additionally utilize AI business name generators for creative ideas that align with your mission.

Once you choose a name, wait for the state’s official filing acknowledgment before using it commercially.

File Articles of Incorporation

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Once you’ve settled on a unique name for your business, the next step is to file the Articles of Incorporation. This document lays the foundation for your corporation’s legal existence. You’ll need to include your corporation’s name, purpose, registered agent’s details, and the number of shares authorized to issue.

The filing fee varies by state, typically ranging from $35 to several hundred dollars. Make sure to file your articles with the appropriate state agency, often the Secretary of State. After submitting, you’ll receive an acknowledgment or certificate confirming your formation.

Here’s a quick overview:

Required Information Details
Corporation’s Name Must be unique and compliant
Filing Fee Varies by state
State Agency Usually the Secretary of State

This step is essential in how to start an S Corp.

Obtain an Employer Identification Number (EIN)

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To legally operate your S Corporation, obtaining an Employer Identification Number (EIN) is fundamental, as it serves as your business’s tax identification number.

This unique nine-digit number is critical for tax compliance and managing payroll. You can apply for your EIN using IRS Form SS-4 in different ways:

Online: Complete the application for immediate issuance. By Fax: Send your completed form directly to the IRS. By Mail: Submit your application through traditional mail.

Obtaining an EIN is free, and it’s indispensable for hiring employees, opening business bank accounts, and filing tax returns.

Make sure to complete the application in one sitting to avoid any issues during the process.

Elect S Corp Status

After securing your Employer Identification Number (EIN), the next step is to elect S Corporation status, which offers several tax benefits for small business owners.

To elect S Corp status, you need to complete and file IRS Form 2553, ensuring all shareholders sign the form for validation. Remember, the S Corp election must be submitted within two and a half months of your tax year’s start to apply for that year.

Make sure you meet S Corp eligibility requirements: your shareholders must be U.S. citizens or permanent residents, and you can’t have more than 100 shareholders. Furthermore, your corporation should have only one class of stock.

Once approved, the IRS will send you a ruling letter confirming your S Corp status.

Apply for Necessary Licenses and Permits

Close-up Of A Person's Hand Stamping With Approved Stamp On Text Approved

As you prepare to launch your S Corporation, applying for the necessary licenses and permits is crucial for staying compliant with local and state regulations.

Here’s how to get started:

  1. Research the licenses required for your specific business type in your state, as these can vary widely.
  2. Obtain a business license from the appropriate state agency, such as the Department of Business and Professional Regulation (DBPR) in Florida.
  3. Check with local municipalities to determine any city or county-specific permits needed for compliance.

Make sure to apply for necessary licenses and permits, including any additional permits for specialized fields like healthcare or childcare.

Keep accurate records of all licenses obtained, including renewal dates, to avoid penalties and maintain compliance.

Conclusion

Starting your S Corporation involves several key steps, each essential for your business’s success. By choosing a unique name, filing the necessary Articles of Incorporation, obtaining an EIN, electing S Corp status, and securing appropriate licenses and permits, you can establish a solid foundation. Following these steps guarantees compliance with legal requirements and sets your business up for future growth. Take the time to complete each step thoroughly, and you’ll be well on your way to operating your S Corp successfully.

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This article, "5 Essential Steps to Start Your S Corp Today" was first published on Small Business Trends

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