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How to Set Up and Maintain an S-Corp: A Complete Guide

Updated: Mar 3

Setting up an S-Corporation (S-Corp) can be a game-changer for small business owners looking for tax advantages and liability protection. But what does it really take to form and maintain an S-Corp? This guide walks you through every step—from initial formation to ongoing compliance—so you don’t miss a thing.


A business owner at a desk reviewing corporate documents and bylaws, preparing paperwork to establish an S-Corp.
A business owner at a desk reviewing corporate documents and bylaws, preparing paperwork to establish an S-Corp.

Step 1: Determine If an S-Corp Is Right for You

Before jumping in, ask yourself: Does an S-Corp make sense for my business?

✅ Best for: Small business owners, freelancers, and consultants making at least $50,000 in income after expenses. ❌ Not ideal for: Passive real estate investors or businesses planning to raise venture capital.

Pros of an S-Corp:

  • Avoids double taxation (profits pass through to owners)

  • Helps reduce self-employment taxes

  • Offers liability protection

  • Potentially increases business credibility

Cons of an S-Corp:

  • More paperwork and compliance requirements

  • Restrictions on ownership (limited to 100 U.S. shareholders)

  • Must pay yourself a “reasonable salary”

Step 2: Form Your S-Corp

1. Choose a Business Name

Your business name must comply with state regulations and be unique. Check availability through your state’s business registry.

2. Register Your Business as a Corporation

File Articles of Incorporation with your state’s Secretary of State office. This typically includes:

  • Business name and address

  • Registered agent details

  • Number of shares issued

  • Purpose of the corporation

3. Get an Employer Identification Number (EIN)

Apply for an EIN from the IRS (IRS Website)—this is like a Social Security Number for your business.

4. Elect S-Corp Status with the IRS

File Form 2553 within 75 days of incorporating (or by March 15th for an existing business) to elect S-Corp status.

Step 3: Draft & Adopt Corporate Bylaws

Corporate bylaws outline how your business is governed and should include: ✅ Ownership structure & shareholder rights ✅ How profits & losses are distributed ✅ Roles of officers and directors ✅ Voting procedures ✅ Rules for meetings & decision-making

💡 Pro Tip: Even if not legally required in your state, bylaws help protect your business in legal disputes.

Step 4: Hold an Organizational Meeting

At this meeting, document: ✅ Approval of bylaws ✅ Election of directors & officers ✅ Issuance of stock certificates ✅ S-Corp election confirmation

📝 Record meeting minutes—this is essential for maintaining corporate compliance.

Step 5: Set Up Financial & Tax Compliance

1. Open a Business Bank Account

Use a separate business checking account to keep personal and business finances separate.

2. Set Up Payroll & Pay Yourself a Salary

S-Corp owners must pay themselves a reasonable salary before taking distributions. A payroll service like Gusto or ADP can handle this for you.

3. Create an Accountable Plan

Reimburse business expenses tax-free by setting up an Accountable Plan, which requires: ✅ Written documentation of reimbursable expenses ✅ Receipts & proof of business purpose ✅ Timely reimbursement policies

Step 6: Maintain Compliance & Avoid Issues

1. Hold Annual Meetings & Keep Minutes

Each year, you must hold a board of directors & shareholder meeting and record minutes covering:

  • Election of officers & directors

  • Major business decisions

  • Financial performance review

2. File an Annual Report (If Required by Your State)

Some states require an Annual Report to keep your S-Corp in good standing. Check with your state’s Secretary of State.

3. Pay Quarterly Estimated Taxes

Since no taxes are withheld from distributions, S-Corp owners must make quarterly estimated tax payments to the IRS.

4. Submit W-2s and K-1s at Tax Time

  • W-2 for your salary (reported as employee wages)

  • K-1 for distributions (reported as pass-through income)

Final Thoughts

An S-Corp can offer significant tax savings and liability protection, but it also requires strict compliance. Following these steps ensures you stay compliant and maximize the benefits.

If you’re detail-oriented, you can handle this yourself—but if you'd rather focus on growing your business (or catching a Lakers game instead of dealing with paperwork), I can help—https://www.glavinicfs.com/bookandrew.

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