North Carolina S Corporation Formation
An S Corporation in North Carolina is an incorporated entity placed on file with
the Corporations Division of the Secretary of State’s Office. The formation documents
are public record and can be viewed by anyone.
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Steps to Forming a North Carolina S Corporation
The first step in forming your S Corporation is preparing North Carolina Articles
of Incorporation. The following information must be present:
- Name: You must select a business name that is available for use—one that is not
the same as or confusingly similar to a name already on file. Let us do a preliminary
business
name search to determine availability.
- Registered agent: The name of the person in charge of accepting mail and service
of process on behalf of the corporation must be provided, as well as his or her
mailing address (a PO Box can only be used to supplement a physical address).
- Shares: An S Corporation must issue at least one share of stock. This stock can
have either par value or no par value.
- Directors/Trustees: The Articles must list the names and addresses of the Board
of Directors/Trustees.
- Purpose: Except in specific circumstances, a purpose statement is optional. You
may be required to obtain consent from a specific agency if you are using a restricted
term in your corporate name. It is a good idea to check with a legal advisor to
determine whether or not you will need to contact an additional agency for permission.
- Incorporator: The name and address of the person responsible for drafting the Articles
should be listed. This person’s signature must appear on the form; you may list
multiple incorporators, but must have at least one.
Once your corporation has drafted and filed
North Carolina Articles of Incorporation, you must register for S Corporation
status with the IRS using the S Corp Election Form.
Further Responsibilities of a North Carolina S Corporation
You must file an amendment
if any of the above information changes.
Each year, your S Corporation must file an Annual Report with the Corporations Division
of the Secretary of State. Check with the Secretary of State’s Office for due dates.
After your Articles of Incorporation have been filed, you have 75 days to file an
S Corp Election Form (form 2553) with the IRS. This form will give you S Corporation
status and allow you to be taxed accordingly.
More Information about a North Carolina S Corporation
Your S corporation:
- Can have up to 100 owners/shareholders, but no more
- May deduct the cost of benefits provided to employers (such as parking permits,
health insurance, and so on)
- Has a board of directors, which oversees the policies of the corporation
- Cannot have more than one class of shares
- Issues limited liability for owners
- Must be owned by US citizens or resident aliens
- Is taxed as owners’ income, not as a separate entity
- Allows business losses to be deducted on the owners’ individual tax returns
- Must pay payroll tax
For S corporations, only the salary paid to the owner-employee is subject to employment
tax. The remaining income that is paid as a distribution is not subject to employment
tax under IRS rules. Therefore, an owner of an S corporation stands to realize substantial
employment tax savings. However, the salary you give yourself must not be artificially
low; if the IRS finds your salary unreasonable, they may reclassify some of the
distribution funds as salary and require you to pay taxes on it.
North Carolina Startup Quicklinks
For information on other types of businesses in North Carolina, please explore the
links below.