Florida LLC » S Corporation

What is a Registered Agent and do I Need One?

admin — Wed, 15 Jul 2009 22:09:14 +0000

Almost every state requires a corporation or an LLC to have a Registered Agent (sometimes called a resident agent, statutory agent, or agent for service of process). The Registered Agent address is the address that will be used by the state for any official legal and tax correspondence. The Registered Agent address must be a physical, in-state street address; P.O. Boxes are not acceptable. If needed, IncFile can provide you with a Registered Agent for only $99.00 per year, and any official legal and tax correspondence from the state will be forwarded to your billing/shipping address.

NOTE: If you require us to provide a registered agent, the address cannot be used as a general business/mail forwarding address. Only official legal and tax correspondence from the state will be forwarded, and any other mailings to the registered agent may result in additional charges.

What is an S Corporation?

admin — Wed, 15 Jul 2009 22:00:02 +0000

An S Corporation is a special form of corporation (Note: The “S” in S Corporation refers to sub chapter S of the tax code). S Corporations are based on C Corporations but they are not treated as a separate tax entity as C Corporations are. Instead, the income of an S Corporation is “passed through” to the personal income of its owners (shareholders) in proportion to their ownership interest. An S Corporation is created by forming a traditional C Corporation and then filing the IRS Form 2553 (The Subchapter S Election) for federal recognition of S Corporation tax status. While the S Corporation has many of the same features as a C Corporation, there are some important differences.

Note: While the S Corporation features similar pass through taxation to an LLC, in the area of self-employment taxes an S Corporation can have an advantage over an LLC. The compensation (salary and bonuses) of S Corporation shareholders is subject to self-employment tax, but not on the profits automatically allocated to them as a shareholder. This can be an advanced and aggressive tax strategy, so be sure to consult with the appropriate tax and legal specialists before pursuing it.

What are the Advantages of an S Corporation?

admin — Wed, 15 Jul 2009 21:59:02 +0000

Limited Personal Liability

This limits the liability of the owners/investors to only the amount of their investment. The owners of a corporation are not personally liable for business debts, claims, or other liabilities.

* Perpetual Existence

The existence of a corporation is considered perpetual, although it can be terminated voluntarily by its owners (shareholders).

* Better fringe benefits

While all business entities can provide fringe benefits to its owners and/or employees, the C Corporation allows for a greater range of benefits.

* Pass-Through Taxation

The S Corporation does not have a separate tax status from its owners (shareholders). Instead, the income is allocated to the personal income proportional to his or her ownership interest.

What are the Disadvantages of an S Corporation?

admin — Wed, 15 Jul 2009 21:57:58 +0000

More extensive record keeping requirements

Corporations typically require more ongoing paperwork than most other business entities in order to stay compliant with the law and maintain their corporate status. This includes holding and documenting annual meetings of shareholders and directors and keeping minutes of important corporate meetings.

Additional Restrictions:

* S Corporations cannot have more than 100 individual (not entity) shareholders
* S Corporations must have shareholders who are US Citizens or US Residents
* S Corporations may only have one class of stock

How is a Corporation Managed?

admin — Wed, 15 Jul 2009 21:56:55 +0000

A Corporation is managed and run by its directors and officers. The directors are appointed by the shareholders and are responsible for the overall management and corporate governance of the corporation. The directors appoint the officers who are responsible for the day to management and operations of the corporation. The typical officer positions are president, vice-president, treasurer, and secretary, although there can be more and sometimes different titles are used. In most states only one director and one officer is required, and they can usually be the same person.

Am I Required to Hold Corporate Meetings?

admin — Wed, 15 Jul 2009 21:56:26 +0000

Once you receive the filed Articles of Incorporation, which signifies the formation of the corporation by your state, your corporation will need to hold an organizational meeting of the initial shareholders and directors. At this meeting the directors will typically adopt corporate bylaws, distribute corporation stock to initial shareholders, and appoint corporate officers. Also, in most states, directors must meet at least once a year, as directors typically must be elected (or reelected) each year. At the annual meeting the board members accept their election to the board, and transact any other necessary business. The date, time, and location of the annual meeting is typically specified in the bylaws. Written notification of the annual meetings is not usually required, but it is probably a good idea. Other regular meetings may be held as spelled out in the bylaws. Special meetings may be called, and it is typically required that directors receive written notice of the date, place, and purpose all special meetings of directors.

NOTE: It is important to observe these formalities and take corporate minutes of the required meetings. Failure to follow these formalities and properly document your meetings (i.e. keeping minutes) can place your corporate status in jeopardy. The necessary record keeping material, sample bylaws, and stock certificates are included in the Customized Corporate Kit provided by IncFile.

How Many Shares of Stock will my Corporation Need?

admin — Wed, 15 Jul 2009 21:54:27 +0000

The number of initial shares your corporation is authorized to distribute is specified in the Articles of Incorporation. The actual number is more or less arbitrary, at your discretion. IncFile uses a default number of 1500 shares (this is due to the fact that 1500 is easily divisible by 2, 3, 4, 5, 6), with a par value of one cent (if your state requires par value, otherwise no par value will be assigned). Some states charge more to form a corporation with a high number of shares and/or high par value.

What are Bylaws?

admin — Wed, 15 Jul 2009 21:54:01 +0000

The bylaws of a corporation are an internal document that contains rules for holding corporate meetings and carrying out other formalities according to state corporate laws. Bylaws are not filed with the state.

What is Stock Par Value?

admin — Wed, 15 Jul 2009 21:53:36 +0000

Par value is a nominal dollar amount given to corporate shares. It doesn’t necessarily reflect their real value, and is typically set at a low value (i.e. one dollar or one cent). The par value of a share is the minimum price at which it may be sold to shareholders, and the par value must be the same for all shares of the same class. The shares can be sold to the initial shareholders, at par value or more, but the price must be the same for each share. Not all states require a par value. Unless you specify otherwise, IncFile will authorize 1500 shares (this is due to the fact that 1500 is easily divisible by 2, 3, 4, 5, 6) with a par value of one cent, or at no par value if not required by your state.

What is the Form 2553?

admin — Wed, 15 Jul 2009 21:50:18 +0000

The 2553 Form, known as the sub chapter S election, is required to be filed with the IRS to get S-Corporation status for purposes of federal taxation. Filing this Form with the IRS is used to convert a C-Corporation into an S-Corporation.