Get the worry-free services and expert support you need to form an S corp in Kentucky today.
Thinking of starting an S Corporation (S Corp) in Kentucky but not sure how to go about it? You’re in the right place. Use our guide below to learn more about S Corps and how we can help you get started on yours.
For a limited liability company (LLC), filing as an S Corp could provide savings on self-employment taxes. For C Corporations (C Corps), it can be a way to avoid double taxation. For more information about how filing as an S Corp could benefit your business, see our “What Is an S Corporation?” page. Keep reading to learn how to file as an S Corp in Kentucky.
You should understand that an S Corp is not a business structure. Rather, it’s a tax classification that either an LLC or a corporation can apply for with the IRS if it meets the criteria. We’ll outline those criteria and the steps you would need to take to file as an S Corp if you decide that it’s right for your business.
If you want to form an LLC with S Corp status, our S Corp service can help you do just that. Plus, we offer other services to help you run and grow your business and stay in compliance with state and federal laws.
The first step to forming your business is choosing a name. We can conduct an available name and domain search to help you narrow your choices. When forming an LLC, the name must contain “limited liability company” or “limited company” or one of its abbreviations (LLC or LC). You can also use the abbreviations Ltd. and Co.
Next, you will need to locate a registered agent who will receive official documents for the company in person. This is required by state law.
If you form a corporation, you’ll appoint directors. LLCs, on the other hand, have managers. An LLC can be managed either by its members (owner-managed) or a hired manager (manager-managed).
The next step is to file Kentucky Articles of Incorporation (for a corporation) or Articles of Organization (for an LLC) with basic information about the business, including name, address, registered agent, and management structure.
To elect S Corporation tax status, you’ll need to file Form 2553, Election by a Small Business Corporation, with the IRS.
The IRS requires that you complete and file your Form 2553 with the IRS:
One caveat for LLCs wishing to file as an S corp: If your LLC is past the 75-day election deadline, you’ll also need to file Form 8832, Entity Classification Election, to elect to be taxed as a corporation. Then you would file both Form 8832 and Form 2553 together via USPS-certified mail.
For more information on when and how to file Form 2553, visit the IRS website.
The IRS requires your business to fulfill certain requirements before you can apply to be taxed as an S Corporation in Kentucky. Your business must:
If you’re looking to build lots of capital through a large shareholder base, an S Corp might not be the entity for you. But it’s a good idea to speak to legal and financial professionals about your best business options.
Is the S Corp tax designation right for your business or not? This decision is highly dependent on your unique circumstances, but we can give you some factors to consider.
Running your business as an S Corporation can provide tax benefits, such as:
How an LLC can save money on self-employment taxes requires some explanation. The members of a standard LLC are considered self-employed. They’re compensated by receiving their share of profits from the LLC, but they can’t be employed by the LLC.
Being self-employed means paying self-employment taxes (about 15.3%) on all profits they receive from the LLC. This is more than the taxes they’d pay when working for someone else because their employer would pay part of them.
When the members elect S corp status, though, they can be compensated in two ways, by receiving their share of the profits and by being paid as an employee. Once they do that, they only pay self-employment taxes on their salary and not the profits they receive. This can add up to thousands of dollars.
One catch to this is that the IRS expects you to pay yourself a “reasonable salary” as an employee of the LLC. Otherwise, you could pay yourself an annual salary of $2 and avoid contributing anything to Social Security and Medicare. The IRS considers “reasonable” to be something similar to what others in your field are earning.
If one of your biggest concerns about choosing the right business structure is your amount of tax liabilities, an S Corp might be the right selection for you.
There can also be drawbacks to an S Corp. How much these disadvantages will affect your business depends on your particular circumstances and priorities:
Once again, we encourage you to speak to a tax and/or legal professional to determine if these factors are significant in the face of your specific needs.
Yes, LLCs can make an S Corp election. They may choose to do so for tax benefits because S Corporations can limit the self-employment taxes that LLC owners pay. To learn more about the tax impacts of choosing a particular business structure, read our article, Tax Information for Limited Liability Companies.
When you hire us to form your LLC, we ask a series of questions to help you determine if the S corporation status is the best option. However, you may want to consult your tax advisor about the tax benefits of an S Corp.
If you decide to take advantage of the tax benefits of an S Corp by forming an LLC with S Corp status, we can assist you. We help you get your business running quickly, taking the legal hassle off your plate so that you can pursue your passion. Contact us to form your Kentucky S Corporation today.
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.
An S Corporation can offer LLC owners savings on self-employment tax. For C Corps, filing as an S Corp can eliminate double taxation.
Any name that isn’t already taken and abides by state naming laws is fine for any S Corp, as you don’t need to indicate S Corp election in the name itself. We can conduct a name and domain search for you to provide available Kentucky S Corporation name options.
There are many factors to consider when determining if an S Corporation is right for your business. A tax professional can best advise you.
We have an S Corp calculator to give you an overview of how taxes are applied to S Corps. However, always consult your tax advisor with specific tax questions or tax strategy considerations.