1. What Is an S Corporation?
2. Steps to Form an S Corporation
3. Benefits of an S Corp
4. Disadvantages of an S Corporation

Knowing how to form an S corp in Florida involves several important steps, including choosing a board of directors and filing information with the state and the IRS.

What Is an S Corporation?

An S corporation is a business type, similar to a corporation in that corporate losses, credits, income, and deductions pass through to the shareholders. This pass-through taxation means there's no double taxation on the owners, as well as on the business.

S corps in Florida only pay taxes on certain passive income or built-in gains. Shareholders in S corps report their shareholder income and losses on their personal tax returns. The amount of income and loss is based on ownership percentages.

Like a C corp, an S corp provides protection to the owners. They're not personally responsible for business liabilities and debts. S corps are subject to similar rules as C corps in that they must hold yearly shareholder meetings. They're also required to keep meeting minutes with their records.

S corp owners who also work in the business are employees, so they're eligible for the following benefits: 

Steps to Form an S Corporation

Follow these steps to form an S corporation:

  1. Check the required qualifications to make sure your company is eligible to register as an S corp.
  2. Choose a name for your corporation. The name must include a designator that makes it clear the company is a corporation (i.e., Inc., Co., or Corp.). 
  3. File an corporations">Articles of Incorporation with the state.
  4. Choose a registered agent.
  5. Start a corporate records book.
  6. Draft a set of corporate bylaws.
  7. Appoint the company's initial directors.
  8. Hold your first Board of Directors meeting.
  9. Issue stock to company shareholders.

You must also comply with Florida's yearly reporting requirements, as well as tax and regulatory requirements.

Notify the IRS that you're registering your business as an S corporation for tax purposes. After you notify the IRS, complete Form 2553. Each shareholder is required to sign Form 2553. You need unanimous approval to operate as an S corp.

If you're operating an existing business and you're electing to operate as an S corp, the deadline to submit form 2553 is March 15 if you want S corp election to take effect in that year.

Benefits of an S Corp

Some business owners elect to operate as an S corp to enjoy the following benefits:

  • Increased credibility: Clients typically view S corps (or corporations in general) as more credible than LLCs, possibly because it takes more work to start and maintain them. Due to this increased credibility, S corps may earn higher revenue.
  • Pass-through taxation: This is one of the biggest advantages to running an S corp since the business avoids taxes at the federal level. 
  • Simple ownership transfer: In a partnership or LLC, if you decide to transfer more than 50% of ownership, you run the risk of the business being dissolved. It's much easier to transfer ownership in an S corp. There are almost no tax consequences and very few hurdles.
  • Securing capital: S corps in Florida are often able to secure additional capital more easily than some other business types
  • Fewer audits: Partnerships and sole proprietorships are usually audited more frequently than S corps.
  • Perpetuation: Corporations may be seen as perpetual since they don't have to end if an owner or shareholder dies. This isn't the case with some other business types.

Disadvantages of an S Corporation

S corps have some disadvantages as well, including the following:

  • Limits on stock ownership: S corps can have no more than 100 shareholders.
  • More careful recordkeeping: The IRS may look much more closely at S corp taxes since company taxes pass through to the shareholders. S corp owners must therefore keep very accurate, thorough records. Failure to do so can actually lead to the demise of an S corp. It doesn't happen often, but no one wants sloppy recordkeeping to end their business.
  • Steps involved in incorporating: It's more costly and tedious to incorporate, especially compared to forming an LLC.

If you need professional help in starting a large enterprise or you think you'd benefit from legal advice from someone who specializes in helping companies incorporate in Florida, consulting with an attorney with experience in this field is highly recommended.

If you need help forming an S corp in Florida or another state, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.