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It’s never been easier to create a business and put it in the most profitable position by creating a Washington S Corporation. Having your company designated as a Washington S Corp allows you to take advantage of many tax savings and makes it easier to run your business.
S Corporation status is a tax designation, not a legal entity business structure. You would first create your company and use the business structure of a corporation or limited liability company (LLC). Then, you declare with the IRS that you want to use an S Corp tax designation. This allows your Washington corporation or Washington LLC to take advantage of tax and other benefits of having S Corporation status.
We can help you establish your company in the best way possible with the most advantages by using our simple, step-by-step guide to creating a Washington S Corporation.
But first, we offer everything you need to create your Washington LLC or your Washington corporation to start your company on the road to success! Not only that, but we also offer everything you need for your business to remain compliant and successful.
The name you choose for your business should be something easily remembered and useful for marketing purposes. First and most important, the name needs to be unique and not already in use by another Washington business. But other than that, all you have to do is follow the Washington company naming guidelines and pick whatever name you want.
A registered agent is required by state law for every corporation, LLC, and registered business entity in Washington. The agent’s role is to accept legal paperwork such as service of process on behalf of your business.
A director or manager is someone that is in charge of the corporation or LLC. This could be yourself, as the owner, or someone else. Directors are needed for a corporation and managers for an LLC.
You next have to file the Articles of Incorporation (for a corporation) or the Articles of Organization (for an LLC) with the Washington Secretary of State’s Corporations and Charities Division. This document is the organizing and controlling document for your company. You must file this document for Washington State to recognize your company and its legal status.
This is one of the easier tasks. The last thing you have to do is file form 2553 with the IRS to designate your company as a Washington S Corporation. This task can be done when you obtain your EIN from the IRS. Once you file this form, you can take advantage of all of the benefits of having a Washington S Corp.
Before you decide to use the S Corporation designation, you should understand the requirements of the tax status and its limitations. To take advantage of S Corp status, your company must:
For companies that already exist, there are timing requirements when changing your Washington corporation or LLC to an S Corporation designation. The form must be filed no more than 2 months and 15 days after the beginning of the tax year the election is to take effect. The other filing option is that it can be filed at any time during the tax year preceding the tax year it is to take effect.
As with many things, there are some positives and negatives with being an S Corp. So you need to evaluate your own circumstances and determine if the pros outweigh the cons of using the S Corp tax designation.
The positives about having a Washington S Corporation include the following:
If the positive aspects of an S Corporation designation will help your business become successful, it’s pretty easy to establish by filing a simple form.
S Corps have restrictions and certain requirements that you may decide are not the best for your business:
For questions about the tax benefits and requirements, it’s always best to review your options with a tax professional.
Keep in mind that if you don’t specifically declare S Corp status, then the IRS will automatically designate your corporation with a C Corp status. C Corp status does not allow pass-through taxation, so your corporation would be subject to double taxation.
C Corps are taxed twice on the income they earn, once at the corporate level and then again at the individual level when the profits are passed down to the shareholders. This is called double taxation. This doesn’t happen with an S Corporation because the corporate level income is allowed to be passed through to the individual shareholders without any corporate tax having to be paid. So the individual shareholders will pay tax only once at the individual rate.
S Corporations are basically small business corporations that have limited corporation shareholders but aren’t subject to corporate double taxation.
Both S Corp and C Corp are tax designations used by the IRS. The major difference is that the S Corp designation allows for pass-through taxation and prevents the double taxation that you would see with the C Corp status. But there are both positives and negatives for both designations, so you need to evaluate what is best for your company and circumstances.
Yes! If you have an existing Washington LLC, you can change its tax status to an S Corp. You may wonder what are the benefits of an S Corp for an LLC, when Washington LLCs already have pass-through taxation? The answer is that there are still tax savings an LLC can take advantage of with an S Corp designation.
For example, for small, Iowa LLCs with just a handful of owners, having an S Corp tax designation will cut down on the amount of self-employment tax that’s required.
We can put you and your company on the road to success by helping you set up a Washington S Corporation. With our easy step-by-step guide, you can quickly learn what’s necessary to take advantage of the S Corp tax designation.
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.
There are many benefits, but the main one is that your company can use pass-through taxation and avoid double taxation.
Choosing the right name for your company goes a long way toward the successful marketing of your business. It’s important to follow Washington’s company naming guidelines and that the name is unique within the state.
You don’t need to make any outward signs that your LLC has converted to an S Corp. You can continue to operate under your state-approved business name and don’t need to make any changes if you choose to make an S Corp election.
It’s very important to correctly file your local, state, and federal taxes for a Washington S Corporation. Make sure to consult a tax professional to help you compile your tax filings.