Do-it-yourself Tennessee S Corporation Kit

Forming an S corporation can save your Tennessee business thousands of dollars a year in payroll and income taxes, and the set-up is actually pretty easy. It just takes three quick and relatively easy steps:

Step One: Form an LLC or Corporation

First, you will need to form either a limited liability company or a regular corporation to serve as the base for your S corporation. To form an LLC, fill out an Articles of Organization form and submit it to the Corporate Filings Office at the Tennessee Department of State in Nashville. The minimum fee for forming an LLC in Tennessee is $300. To form a corporation, fill out a Charter form, and submit it and the $100 filing fee to the Department of State.

Step Two: Apply for an EIN

After forming either the LLC or the corporation, you will apply for an Employer Identification Number, or EIN. To apply, fill out a SS-4 form, which you can find on the IRS website. After you submit your completed SS-4 form to the Internal Revenue Service, you should receive your EIN a few weeks later.

Step Three: Make the S Corporation Election

The final step is making the election to be treated as an S corporation. Fill out a 2553 form, and submit it to the Internal Revenue Service Center in Ogden, Utah. The IRS will then evaluate your form to see if you are eligible to make the election, and that you followed the correct procedure before you receive S corporation status.

Caution: While an S corporation election changes the way a corporation or LLC is treated for federal income tax purposes, the election doesn't change the way a corporation or LLC is treated for Tennessee state income, franchise or excise tax purposes. Why? Tennessee doesn't recognize the Subchapter S election (per Tenn. Code Ann. Section 67-4-2006(a)(3).) In other words, the S election doesn't change your state tax burden or save you state taxes. The election only saves you federal income and payroll taxes.

If you would like more instruction than what I've provided above, consider downloading one of my do-it-yourself S corporation kits. I created two versions of them: one explains how to form an S corporation using an LLC as the base, and the other using a regular corporation as the base.

Kit Version One: Using an LLC

I recommend using an LLC as the base for your S corporation, and most knowledgeable professionals will agree with me. LLCs are easier than corporations to manage because they don't require things like regular board meetings or stockholder's meetings. This kit explains the benefits and drawbacks associated with forming an LLC in Tennessee, and it provides clear, detailed steps to guide you through the entire process.

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Kit Version Two: Using a Corporation

I also sell a corporation version of my do-it-yourself kit for businesses that would benefit more from using a corporation. This kit analyzes the positive and negative effects of incorporating in Tennessee, and how to balance them. It also provides detailed instructions to guide you through all three steps of the process. As an added bonus, I included a set of sample corporate bylaws, which you or your attorney may use as a template for creating your own bylaws.

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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.

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