Start a Georgia S Corp

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Compared to traditional business entities S corporations (S Corps) have the major benefit of reducing tax liabilities through pass-through tax treatment. Pass through taxation is a special status recognized by IRS. When companies choose this status, they don’t pay corporate income taxes. Instead, business profits are passed through on the owners according to the ownership percentages and are reported on their personal tax returns. However, in order to take advantage of this highly versatile business vehicle, you first need to know fundamentally what an S corporation is.

Start an S Corp in Georgia

How to Start an S Corporation in Georgia

To begin, an S Corporation is not a stand-alone entity like a C corporation (C Corp) or limited liability company (LLC). Rather, it is a federal tax election under the IRS, which confers the above-mentioned pass-through tax treatment on its shareholders. However, S Corps offer much more than that, and we encourage you to dig deeper by checking out our S Corporation information page.

1. Choose a Business Name

When considering a name for your business, make sure to select one that will stand the test of time. We offer services to help make choosing a name easier. We can search to ensure that your desired name is not currently in use, and we can help guide you to adhere to other Georgia naming requirements. 

2. Appoint a Registered Agent in Georgia

The Georgia Secretary of State (SOS) requires all business entities to have a registered agent available during normal business hours to accept service of process and other important documents.

3. Choose directors or managers  

You will need to appoint initial directors (C Corp) or managers (LLC) for your business. The easiest way is through an initial company resolution. Note that initial company resolutions can come from the company’s founders.

4. File Articles of Incorporation/Organization with the Georgia Secretary of State (SOS)

At this point, you are ready to make your foundational business entity. To do so, file Articles of Incorporation for your C Corp or Articles of Organization for your LLC with the SOS. Georgia corporations may also need to start a corporate records book and create corporate bylaws. You also need to file for an employer identification number (EIN) as well, but we can help with that.

5.  File Form 2553 to turn business into an S Corporation

This is where you actually create your Georgia S Corp by filing Form 2553 with the Internal Revenue Service (IRS). It is truly Form 2553 that turns your C Corp or LLC into a Georgia S Corporation. Keep in mind that if you’re using an LLC, you first need to make a tax election with the IRS and possibly the Georgia Department of Revenue to treat it as a corporation.

S Corporation Requirements and Limitations

To receive the significant S Corp tax benefits from the IRS, you must fulfill specific requirements in forming an S Corporation in Georgia. The IRS states that an S Corp must:

Given the above restrictions on shareholders, a Georgia S Corp might not be right if you think you may need to attract more capital in the future from existing or new shareholders. Therefore, discuss your financing plans with your legal and financial professionals to confirm what’s the best business entity for you. 

Pros and cons of creating an S Corporation

S Corps are unusual animals. Because of that, we thought it would be helpful to set out some pros and cons for you to weigh before settling on a Georgia S Corporation. 

Pros

Running an S Corporation can be beneficial in many ways, such as:

Clearly, the above benefits make an S Corp very attractive, especially if you are trying to reduce your tax footprint.

Cons

Of course, there can also be drawbacks to an S Corporation, such as:

We hope that the above will stimulate further thoughts about how an S Corp may or may not fit into your overall business ideas. 

What to know before creating an S Corporation in Georgia

As mentioned above, a Georgia S Corp isn’t a stand-alone business entity but rather piggybacks on another more traditional business entity such as a C Corp or an LLC. Below we offer a few more insights about S Corps for your consideration. 

What is an S Corporation?

An S Corporation is a special tax status defined in Subchapter S of the Internal Revenue Code. Election of the status by a small business offers certain tax advantages compared to the taxation of large companies. The main advantage is that by electing an S corp status an LLC or corporation avoids the issue of double taxation of its business profits. In S corporations, profits get passed onto their shareholders and the shareholders pay their income tax individually.

What’s the difference between an S Corporation and a C Corporation?

First, while S Corps have IRS restrictions on the amounts and classes of shares that it issues, as well as who can be a shareholder, C Corps have virtually none. However, the most significant difference and possibly the biggest draw, is how an S Corp’s income is treated for tax purposes.

You probably have heard of the classic C Corporation’s double tax on income (i.e., the C Corp pays income taxes at the corporate level, and then each shareholder has to pay taxes on their income from the corporation). S Corporations are free of this double tax because they pass their income to the shareholders so only the shareholders have to pay taxes on the Georgia S Corp’s income. 

What are the requirements to create an S Corporation?  

To set up an S Corporation in Georgia, you first have to create a foundational entity such as a C Corp or LLC. Then you must file Form 2553 with the IRS. That said, make sure you follow the IRS guidelines before you file Form 2553.

Can LLCs choose an S Corporation election?

Yes. There’s no reason an S Corp can’t have an LLC as its foundational entity. Further, choosing to tax your LLC as an S Corporation may reduce some of your tax liabilities and thus add even more benefit to the already flexible nature of an LLC. Learn more about LLCs and taxation on our Tax Information for Limited Liability Companies page. 

How We Can Help

Since an S Corp is simply a tax election, the true beginning point to creating a Georgia S Corp is by starting the initial business. We can simplify that part with our Georgia LLC Formation Service and our Georgia Corporation Formation Service. Once your business is established, we offer continuing support with our various business development and maintenance services

We can untangle all of the seemingly complex aspects of an S Corp for you. Therefore, if you want to start a Georgia S Corp, then our S Corporation Service can do it quickly and accurately. You can also look to us to assist you with the formation, maintenance, or compliance needs of your enterprise. We are here to help.

Disclaimer: The content on this page is for information purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

FAQs

  • What are the benefits of creating an S Corporation in Georgia?

    Creating an S corporation in Georgia allows for the limited liability of a C Corp while also providing the benefit of pass-through taxation.

  • How should I choose a name for my Georgia S Corp?

    Generally, a corporate name needs to be professional and something you can live with for the life of the business. It must also follow state rules regarding naming businesses.

  • Should I identify my LLC as an S Corporation?

    There is no need to identify your LLC as a Georgia S Corp. Provided that you’re following the Georgia naming restrictions regarding the use of “LLC” or “limited liability company,” you don’t need to go any farther than that.

  • How should I calculate taxes for my S Corporation? 

    Generally, your taxes are calculated at your personal income tax level. Review the specific requirements with both the IRS and the Georgia Department of Revenue to make sure you comply.  We encourage you to consult your tax professional since tax filing is highly specialized.

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