Are you thinking of starting a business in Michigan and considering the S-Corporation structure? An S-Corporation offers several advantages, such as limited liability protection, pass-through taxation, and ease of ownership transfer. This article will guide you through the steps to start an S-Corporation in Michigan in 2023.
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What is an S-Corporation?
Before diving into the process of starting an S-Corporation in Michigan, let's understand what it is. An S-Corporation, also known as an S Corp, is a type of business structure that provides legal protection similar to a corporation, but with the benefit of pass-through taxation. This means that the income or losses of the business are reported on the personal tax returns of the shareholders.
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Step 1: Choose a Name for Your S-Corporation
The first step in starting your S-Corporation in Michigan is to choose a unique name for your business. The name should not be similar to, or easily confused with, another existing business. You can check the availability of your desired business name on the Michigan Department of Licensing and Regulatory Affairs (LARA) website.
Dig Deeper - Start an S Corp in Maryland
Step 2: Appoint Directors and Shareholders
An S-Corporation requires a board of directors to oversee its policies and decisions. You need to appoint at least one director for your corporation. Additionally, you need to determine the shareholders of your corporation. Shareholders are the individuals or other businesses that own the corporation.
Step 3: File Articles of Incorporation
To formally create your S-Corporation in Michigan, you need to file Articles of Incorporation with the Michigan Department of Licensing and Regulatory Affairs (LARA). This document provides essential information about the corporation, such as its name, purpose, duration, and registered agent.
You can either file online through the Michigan Business One Stop (MBOS) website or submit a completed paper form. The filing fee is $60 for online filings and $65 for paper filings.
Step 4: Obtain an Employer Identification Number (EIN)
An Employer Identification Number (EIN) is a unique identification number assigned by the Internal Revenue Service (IRS) to your business for tax purposes. You need to obtain an EIN for your S-Corporation. You can apply for an EIN online on the IRS website, or you can complete Form SS-4 and mail or fax it to the IRS.
Step 5: File Form 2553 with the IRS
To be recognized as an S-Corporation for federal income tax purposes, you need to file Form 2553 with the IRS. This form notifies the IRS that your corporation wants to be treated as an S-Corporation. It must be filed no later than two months and 15 days after the beginning of the tax year in which the election is to take effect.
Ensure that all shareholders sign the form, and each shareholder should receive a copy for their records.
Step 6: Register for State Taxes
To operate your S-Corporation effectively in Michigan, you may need to register for state taxes. This includes sales and use tax, withholding tax, and unemployment insurance tax.
Visit the Michigan Department of Treasury website to register for the appropriate state taxes. You may need to set up an account with Michigan Treasury Online (MTO) to file and pay your taxes online.
Step 7: Obtain the Required Licenses and Permits
Certain businesses may require additional licenses and permits to operate legally in Michigan. The requirements vary depending on the nature of your business activities. Contact the Michigan Department of Licensing and Regulatory Affairs (LARA) or your local county offices to determine the specific licenses and permits required.
Conclusion
Starting an S-Corporation in Michigan can be a straightforward process if you follow the necessary steps outlined in this guide. Remember to choose a unique name, file the required documents with the state and IRS, obtain an EIN, register for state taxes, and obtain any necessary licenses or permits for your specific business activities. Consulting with a business attorney or tax professional can also provide valuable guidance throughout the process. Good luck with your new venture!
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