Start a Kentucky S Corp

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Kentucky s corp

Are you thinking of starting a business but aren’t sure how to handle the legal aspects of formation? With so many Kentucky business structures available, from a limited liability company to a corporation, which is best for your company?

An S Corp in Kentucky, which is a tax election for an LLC or a corporation, can appeal to owners seeking tax savings. We help companies handle all the Kentucky S Corporation filing requirements, making it simple for you to go from an idea to a fully operational business.

Use our Kentucky Corporation Formation Services and LLC Formation Services to form your Kentucky business. We can also help you form your business as a Kentucky S Corp, which may be beneficial for tax purposes.

We can discuss Kentucky S Corporation and other formation options with you and simplify the startup process by providing an operating agreement template. We can even connect you with a registered agent. Plus, we offer other services, such as a website template and annual report filing that help you grow your business and stay in compliance with state and federal laws.

1. Choose a Business Name 

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.

2. Appoint a Registered Agent in Kentucky

Next, you will need to locate a registered agent that will receive official documents for the company. This is required by state law.

3. Choose Directors or Managers 

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).

4. File Articles of Organization or Articles of Incorporation with the Kentucky Secretary of State

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.

5. File Form 2553 to Elect S Corp Tax Status

To elect S Corporation tax status, you’ll need to file Form 2553 with the IRS. If your business is an LLC, you’ll first need to change your LLC tax election to a corporation by filing Form 8832.

S Corporation Requirements and Limitations

S Corporations can be easier to run than other entities, but they’re not without their own complexities and potential drawbacks. The IRS requires your business to fulfill certain requirements before you can run an S Corporation in Kentucky. Your business must:

If you’re looking to build lots of capital through a large shareholder base, an S Corporation 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. 

Pros and Cons of Creating an S Corporation

Is the S Corporation 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. 

Pros

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

If one of your biggest concerns about choosing the right business structure is your amount of tax liabilities, an S Corporation might be the right selection for you.

Cons

There can also be drawbacks to an S Corporation, depending on who you are and the type of business you have.

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.

What to Know Before Creating an S Corporation in Kentucky 

The C Corporation designation is the default election for any corporation, so you must take specific steps to form an S Corporation. So what is an S Corporation? A Kentucky S Corporation is a tax election, rather than a business entity. A Kentucky S Corporation brings certain tax advantages and protections from liability.

The IRS treats the Kentucky S Corp as a “pass-through entity,” which means that corporate profits and losses pass through to the shareholders without being taxed at the business level. This avoids the double taxation that C corporations face, making the S Corp tax rate lower.

Aside from pass-through taxation, filing as an S Corporation can save business owners money by splitting income into salary and distribution. This can save on self-employment taxes because the IRS requires you to pay this tax only on your salary. The remaining income designated as distribution isn’t subject to self-employment tax. Since self-employment tax is 15.3%, this savings can be significant.

Companies that meet IRS requirements can file as a Kentucky S Corporation, potentially saving owners substantial self-employment income taxes. Eligible companies meet the following requirements:

If the company meets S Corp qualifications, all corporation shareholders must sign Form 2553 Election by a Small Business Corporation before submitting this form to the IRS.

Can LLCs choose an S Corporation election?

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.

How We Can Help

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, we can assist you with any filing requirement, business formation documents, and continued compliance. We help you get your business running quickly, taking the legal hassle off your plate, so 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.

Kentucky S Corp FAQs

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

    An S Corporation can offer owners tax advantages, such as reduced self-employment tax.

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

    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.

  • Should I identify my LLC as an S Corporation?

    There are many factors to consider when determining if an S Corporation is right for your business. We can walk you through considerations and potential risks and benefits.

  • How should I calculate taxes for my S Corporation? 

    Our advisors can help you understand S Corporation taxation. However, always consult your tax advisor with specific tax questions or tax strategy considerations.

How to Form an S Corp in Your State

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