How to Become an S-Corp in NC: A Step-by-Step Guide

If you own a business in North Carolina, you might be thinking about setting up a S corporation (S-corp) to benefit from the liability protection and tax advantages that come with this kind of corporate structure. Here is a step-by-step tutorial for NC S-corp formation.

You must first establish a corporation under North Carolina law in order to be eligible for S-corp status. This entails submitting articles of incorporation and paying the filing fee to the NC Secretary of State. Additionally, you must select a distinctive name for your corporation and designate a registered agent to accept official correspondence on your behalf.

The IRS will then need to provide you an Employer Identification Number (EIN). This special nine-digit number serves as your company’s tax identification. Applying for an EIN is possible online, by mail, or by fax.

You must submit Form 2553 to the IRS in order to choose the S-corp status. This form must to be submitted by March 15 of the tax year in which you seek to become an S-corp, or within 75 days after the business’s incorporation, whichever comes first. Basic information regarding your company, like its name, address, and EIN, must be provided.

S-corps are pass-through entities, thus the company does not have to pay income tax. Instead, S-corp shareholders in North Carolina are responsible for paying state income tax on their part of the business’s profits, which is passed through to the shareholders, who report it on their individual tax forms.

The cost of forming an S-corp in North Carolina might differ depending on a number of variables, including the intricacy of your company’s organizational structure and the fees charged by your accountant or lawyer. But you should budget at least a few hundred dollars for filing costs and legal expenses.

You must pay yourself a fair wage as an S-corp owner for the work you perform for the company. This pay should be in line with the fair market value of your services and with what you would provide an employee in a comparable role. Your salary may be examined by the IRS to make sure it is fair and not an attempt to evade paying payroll taxes.

A single member LLC is a kind of business structure that protects the owner’s assets while enabling them to deduct business revenue and costs from their taxable income. In contrast, an S-corp is a type of corporation that provides pass-through taxation and liability protection. The primary distinction between an S-corp and a single member LLC is that the former is a separate legal entity from its stockholders. S-corps also have stricter rules for administration and ownership than single-member LLCs do.