Do-It-Yourself Maryland S Corporation Kit

Turning your business into an S Corporation can save you hundreds or thousands of dollars in income and payroll taxes. What's more, you can easily set up such an S corporation. You simply follow three simple steps:

Step 1: Form an Eligible Entity

To do this, you form either a limited liability company or a corporation. That's right, you don't need to be a corporation to be an S Corporation. When you create an S Corporation, you actually make an election with the IRS to be treated using the tax law described in Subchapter S of the tax code (where the "S" comes from). Actually, any eligible entity can make this election. You could use a limited liability partnership, for example, but the most common and most practical platforms to make this election from are a traditional corporation or a limited liability company.

To form an LLC in Maryland, you fill out an Articles or Organization form and submit it to the Department of Assessments and Taxation in Baltimore. To form a corporation, you fill out an Articles of Incorporation form and submit it to the Department of Assessments and Taxation, as well.

Step 2: Obtain an EIN for Your Business

An EIN, or Employer Identification Number, acts like your business's social security number. To get one, you fill out an SS-4 form, which the IRS makes available at its website.

Step 3: Make the Subchapter S Election

Once you receive your EIN, you can make the election to be an S corporation. For this, you fill out a 2553 form. You submit this form to the Internal Revenue Service Center in Cincinnati, Ohio.

Note: Different states send this form to different IRS Centers; one is located in Cincinnati, Ohio, and the other is in Ogden, Utah. If you are forming an S corporation in a state besides Maryland, be sure to check which IRS Center you send this form to.

Some people feel confident enough in their business fines to complete this entire process themselves, and if you're one of them by all means get started. But, if you would like some friendly guidance through the process consider purchasing and downloading one of my do-it-yourself kits. I have prepared two versions: one explains the process using an LLC, and the other kit explains the same process using a traditional corporation.

Using an LLC fo a Maryland S Corporation

In most circumstances, businesses should use an LLC to make the election to be treated an S Corporation. Managing an LLC is easier than managing a corporation. My kit explains the pros and cons of forming an LLC in Maryland, and it of course gives detailed steps describing the entire process. I also include examples of completed forms for your reference, as well as two sets of sample operating agreements. (One set if for single member (or single owner) LLCs and another set for multiple member (multiple owner) LLCs.

Using a Traditional Corporation for a Maryland S Corporation

While I strongly recommend using an LLC to form your S corporation, I also sell a kit for those of you who want to use a traditional corporation.

(To clarify, traditional corporations aren't always the "wrong" choice for forming an S corporation. For example: if you really need to have the word "corporation" in your business name for, say, credibility reasons, using a corporation may be the right choice for your business.)

The corporation version of my Do-it-yourself kit includes an in-depth discussion of the benefits and potential hazards of a corporation in Maryland. This kit also includes clear instructions to guide you through the entire process, as well as the completed forms for reference. As a bonus, I added a set of sample corporate bylaws for you or your attorney to use as a starting point for drafting up your own bylaws.

 

Additional Information You May Find Useful

If you want additional information about how to maximize the tax savings related to running a business or investment venture, you may also be interested in one of our downloadable e-books (see descriptions below). Each book covers a category of tax planning topics that easily save a business owner significant amounts of income or self-employment taxes (potentially thousands of dollars a year) and is instantly downloadable.

Often the best tax saving tool private companies have? The Section 199A deduction which allows them to avoid taxes on the last 20 percent of their income.

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Using an S corporation for your business? To maximize savings, you need to minimize the salary paid to shareholders. But this decision is tricky.

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Nearly secret, the federal government's employee retention credits provide tremendous payroll tax savings for most small businesses... A new book from our firm explains.

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