Virginia S Corporation Formation
In order to form a Virginia S Corporation, you should submit formation documents to the Secretary of State. Then, you will obtain the “S” status from the IRS. Only then are you technically an “S” corporation.
Steps to Forming a Virginia S Corporation
The formation documents for an S Corporation in Virginia are called Articles of Incorporation. Yours should include, at minimum, the following:
- Name: Your name must be available for use and must contain a designator appropriate for your entity type (“Inc.” or “Incorporated”, for instance, but not “LLC”). It may be a good idea to perform a corporate name search before submission.
- Shares: Provide the number of shares your corporation is able to issue. A Virginia S Corporation must have at least one share and cannot have more than 100 shareholders.
- Registered Agent: Every Virginia corporation, regardless of the type, must have a person or already existing entity on file that can accept service of process or mail on behalf of the corporation. This person or entity must have a physical address in Virginia.
- Directors: List the names and addresses of your initial directors.
- Incorporator: The name and signature of the person who drafted the Articles of Incorporation should appear here.
Further Responsibilities of a Virginia S Corporation
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.
Virginia S Corporations must submit Annual Reports, along with an annual registration fee. Failure to do so will result in penalties.
If any of the information laid out in the Articles of Incorporation changes after filing, you should submit an Article Amendment so the state is able to contact you at all times.
More Information about a Virginia S Corporation
Your Virginia 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.
Other Types of Businesses in Virginia
For information on other types of businesses in Virginia, please explore the links