Forming an S Corp in Washington State
Okay, so here's something that may surprise you. Setting up an S Corporation in Washington State is easy. Surprisingly easy, in fact.
Step One: Form an LLC or Corporation
Your first step for forming an S Corp in Washington state is to file either the Washington LLC formation or for-profit incorporation forms with the Secretary of State in Olympia to create an "eligible entity." (An eligible entity, by the way, is simply an entity that is allowed to make a Subchapter S election.)
The LLC formation and incorporation forms supplied (for free) by the Secretary of State's website are really simple. Mostly, the forms, both two pages in length, collect information like the name you want to use for the new entity and its address. No kidding, you can probably complete either form in less than 10 minutes. And once you have completed the forms, you fax them to the Secretary of State along with a check for the fee LLC's and corporations charge $180 fee for formation or incorporation.
Note: The Washington Secretary of State also provides an online LLC formation or incorporation application, which costs slightly more ($230) but gives you nearly instant LLC formation or incorporation.
Step Two: Obtain an Employer Identification Number
After your limited liability company or incorporation paperwork has been processed and accepted by the Secretary of State, you need to file an SS-4 form with the Internal Revenue Service to request a taxpayer identification number for the new LLC or corporation.
The SS-4 form is available for free download from the www.IRS.gov website. Note that this form is a bit more work to fill out the Washington State incorporation or LLC form because it collects quite a bit of information about what your new business or investment entity will be doing--including information about whether or not it will pay payroll. However, the IRS website does provide detailed instructions for the SS-4 form. (Note: If you've obtained EINs before you might also want to use the online EIN application process-which essentially walks you through the SS-4 form using an online wizard.
Step Three: Elect Subchapter S Status
After you get your EIN, you file another form with the Internal Revenue Service, a 2553, to make the election to have the LLC or corporation use the tax accounting rules specified in Subchapter S of the Internal Revenue Code. Once a corporation or LLC makes this election, people commonly refer to the entity as an S corporation. By the way, if you're thinking it's a little funny to call an LLC that's made an S election an "S corporation," you're right. It is funny. Probably, people should call them "S LLCs" or "Subchapter S LLCs."
If you feel confident completing these steps on your own, by all means get started. If you would like some extra help, I created two seperate do-it-yourself kits: one for LLCs and one for Corporations.
Option 1: LLC Version
For $37.95, you can purchase the 20+ page pdf document that discusses and describes the benefits of creating an S corporation using a limited liability company.
This kit explains in step-by-step fashion how to setup an Washington state LLC , how to get a federal tax identification number for your new LLC so you can start banking and other financial activities, and how to elect to have your LLC treated (for federal and state income tax purposes) as an S Corporation so you can maximize your tax savings.
The $37.95 kit includes examples of completed state and federal forms so you know exactly what your setup documents should look like.
The LLC-flavor of the Washington state S corporation kit comes with two sample operating agreements, one for single member LLCs and one for multiple member LLCs.
Table of Contents
Understanding the Twin Benefits of an LLC
- Limited liability protection
- Tax classification flexibility
- Drawbacks of an Washington LLC
- Steps for forming an Washington LLC
- Licensing a business in Washington
- Precise steps for getting a Federal EIN for your LLC
- Precise steps for electing S Corporation status for your LLC
Option 2: Regular Corporation Version
You can also set up a traditional corporation and then make the Subchapter S election to have the corporation treated for income tax purposes as an S corporation. This option may be the right choice when you want to be a corporation for credibility or "branding" reasons. For example, if you want to use the name "corporation" or the acronym "inc" in your business name, you would form a regular corporation and not a limited liability company. (A limited liability company will typically use the acronym "LLC" in its name--and some people don't like that.)
For $37.95 you can purchase the 35 page pdf document that discusses and describes the benefits of creating an S corporation using a regular, traditional corporation. Specifically, the regular-corporation version of the kit explains provides step-by-step instructions for incorporating your active trade or business in Washington, how to get a federal tax identification number for your new corporation so you can start banking and other financial activities, and how to elect to have your corporation treated for federal and state income tax as an S Corporation so you can maximize your tax savings.
By the way, after reading the kit document, you may decide to skip the Subchapter S election and leave your corporation taxed as a regular corporation, or C corporation. C corporations do deliver some unique tax benefits to their owners, as discussed in the kit.
The regular-corporation version of the Washington state S corporation kit includes sample corporate bylaws, which you or your attorney can edit to create your own, personalized bylaws.
Table of Contents
Understanding the twin benefits of incorporation
- Limited liability protection
- Tax benefits of corporations
- Drawbacks of an Washington corporation
- An overview of federal and state corporate tax rules
- Steps for easily incorporating an Washington corporation
- Licensing a corporation in Washington
- Quickly getting a federal employer identification number (EIN) for your corporation
- Precise steps for electing Subchapter S Corporation, or S Corp, status for your corporation
- Sample Washington corporation by-laws
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.
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