Are you forming a new S Corporation in San Diego or Southern California? Is the selection of an S Corporation the right alternative for your new business entity? What advantages and disadvantages are associated with an S Corporation?
The Advantages of an S Corporation
When you form a new corporate entity and take the S Corporation election you establish some tax advantages for your new company that are more like a partnership in some ways. The Subchapter S corporation was designed to bridge the legal gap between the full legal protections and double taxation associated with a C-Corporation, and the easier tax burdens of a partnership without the need to designate personal liability for at least one owner.
Forming an S Corporation in San Diego allows all the income to transfer directly to the shareholders of the corporation, avoiding the corporate taxes owed by a C Corporation. S Corporations provide some protections regarding payroll and FICA taxation, potentially allowing more income to pass to the shareholders without the burdens of these payroll related taxes. There are some limitations on S Corporations that may limit this option as an appropriate selection for your new corporate entity. The S Corporation must be a domestic company in the United States and is limited to 100 shareholders. There is only one class of stock in an S Corporation and this can have an impact on voting issues and control of the corporation.
Recent tax law changes can provide a significant tax incentive to select the S Corporation based upon how and where you will conduct business. The S Corporation will be required to pay California’s annual $800 minimum franchise tax.
The Steps Required When Forming a New S Corporation in San Diego
What are the basic steps required when forming a new S Corporation in San Diego and Southern California? How can the more than 40 years of experience at the Watkins Firm help with your new corporate entity?
The Watkins Firm has a proprietary library of proven, successful business contracts and corporate documents. We don’t create corporate documents from scratch. That would be much too expensive and time-consuming. We begin with updated Corporate Documents and tailor them to the unique aspects of your new company.
We help our clients at every step in the process from the selection of the name to preparing corporate documents including the bylaws and shareholders’ agreements. Many business owners do not fully appreciate the importance and value of the shareholders’ agreement. This important corporate document establishes how those who own an interest in the company will relate to one another throughout the term of their ownership. Getting this document right at the outset can and will prevent disputes and litigation down the road. It will also make it much easier for majority interests to manage each step in the life of the corporation.
Ultimately you will need to appoint the Corporate Directors and hold a meeting of the Board of Directors to adopt bylaws, appoint company officers, and ensure the issuance of company stock. In the initial meeting the Board must approve the S Corporation election to protect the status of the new entity.
There is a required California Statement of Information as well as other California taxes and fees, including the $800 minimum franchise tax. The Watkins Firm helps you to work through all of these steps and lay a firm foundation for the future of a successful company.
40+ Years of Experience Forming a New Corporate Entity in San Diego and Southern California
The Watkins Firm has 40+ years of experience forming a new corporate entity in San Diego and Southern California. We provide sound advice and counsel during the process of forming a new S Corporation in San Diego and throughout the life of the S Corporation itself.
We invite you to review our recent Podcast Episode 34 – Business Formation as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.
