Can I really set up an S corporation without the help of an attorney or accountant?

Yeah. You probably can set up an S corporation yourself.

Congress and your state's Secretary of State have intentionally made the process for forming a corporation and electing S corporation status straight-forward, easy and forgiving.

Incorporating Simplest Step

Forming the corporation or limited liability company that you later turn into an S corporation is probably the simplest step. You simply locate and then complete the correct form. Mostly, filling out this form is a matter of entering your name and address into blanks on a form.

Note: The downloadable do-it-yourself kits we publish provide step-by-step instructions for retrieving the correct form from the appropriate government web site and then for filling out that form.

Subchapter S Election Doable If Slightly More Difficult

After you successfully form the corporation or limited liability company, you next prepare and submit the 2553 form and some supporting documentation to the appropriate Internal Revenue Service office. The 2553 S election form is perhaps a bit more complicated because it asks you to make several tax accounting decisions. But if you follow the form instructions precisely and do a bit of homework, you can correctly complete the S election paperwork, too.

Note: A larger chunk of the do-it-yourself S corporation kit talks about the mechanics of getting the new entity's tax identification number and the steps for filling out the S election form.

But summing things up, absolutely, you can setup an S corporation without the help of an attorney or accountant. You need to be careful, of course. And I think a do-it-yourself guide helps. But you can do the work yourself.

Watch Out for These Two Gotchas

Two closing cautions: Most states with income tax (and most states do levy an income tax) honor the federal Subchapter s election. In other words, if you make the federal S election, the states recognize that election. Unfortunately, a handful of states don't accept the federal s election. The entity wanting to become an S corporation must file not only the federal Subchapter S election, but also a state Subchapter S election. You want, therefore, to verify whether your state requires a separate S election if you do this on your own.

And a related caution: Some states simply do not allow an S corporation for state income tax purposes. For example, the state of Tennessee does not allow a limited liability company or corporation to use the S corporation tax accounting rules. And the state of Massachusetts does not allow the S corporation tax accounting rules to be used once the corporation grows to a certain size.

Note that Tennessee and Massachusetts business owners may still be able to save substantial employment and federal income taxes by operating as an S corporation for federal income tax accounting purposes--but they won't necessarily save state income taxes.

Back to list of frequently asked questions

 

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.

Small Business Tax Deductions Secrets cover image

One of the most powerful tactics for saving small business taxes is maximizing your deductions. You can literally save thousands in taxes each year.

Read More
S Corporations Salary Secrets cover image

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

Read More
Real Estate Tax Loopholes cover image

Tax laws provide active real estate investors with giant tax planning loopholes. A little upfront planning on your part could save you thousands a year...

Read More