How to Start an S-Corporation in Louisiana (2024 Guide)

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Start an S-Corporation in Louisiana

If you want to start an LLC in Louisiana, there are things that you should consider. Louisiana is the home to a thriving business community, making it an attractive location for entrepreneurs. One popular business structure is the S-Corporation, which offers several tax and operational advantages. This comprehensive guide will explore the process of starting an S-Corporation in Louisiana, including the costs, steps, advantages, and disadvantages associated with this business structure.

Webinarcare Editorial Team will help you gain knowledge through thorough research and market study. Before starting your S-corp, all the steps in this article must guide you.

How to Form an S-Corporation in Louisiana

What is an S-Corporation?

An S-Corporation is a type of corporation that elects to be taxed under Subchapter S of the Internal Revenue Code. This tax treatment allows S-Corporations to enjoy pass-through taxation, meaning the corporation’s income, deductions, and credits flow through to the shareholders, who report this information on their individual tax returns. This structure helps to avoid the double taxation experienced by C-Corporations.

An S corporation (S corp) is not a type of corporate entity, unlike a limited liability company (LLC) or other companies. It’s a tax classification that might result in significant financial savings for corporations and LLCs but in different ways. S-corp is similar to LLC, except that the IRS treats it as a corporation for tax purposes.

Limitations and Requirements of S-Corp

As you have decided to have an S-Corp structure for your business, you must know the limitations and requirements to qualify for S-Corp status. We have listed some important points to consider following for your reference-

  • Be a domestic corporation.
  • Not be an ineligible corporation, such as specific financial institutions, insurance providers, or domestic corporations engaged in overseas sales.
  • Have just one type of stock.
  • Have a maximum of 100 shareholders or members.
  • Have only permitted individuals, certain trusts, and estates as stockholders or members.

You can apply for an S-Corp in Louisiana if qualified for the limitations and requirements.

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How to Form an S-Corporation in Louisiana?

To create S-Corp in Louisiana, you must follow the below guidelines that include forming a business name, hiring a Resident Agent, filing your Articles of Organization, creating an operating agreement, requesting an EIN, and filing a form 2553.

Step 1: Register a Business Name in Louisiana

After you have decided on the idea to start an S-Corp in Louisiana, deciding the name for your corporation is significant. Legal procedures should be taken into account when choosing your partnership name. Choose a business name that will enable you to develop a strong brand identity.

If you want to set up an S-Corp, there is a complete guide on Louisiana Business Name Search for a proper business name. Here are some guidelines you must follow while naming your S-corp.

  • Avoid profanities
  • The name should be available, and no other entity should have the same name in Louisiana.
  • Limit of restricted words that need a license in Louisiana
  • Do not use a business name that sounds like a government agency or entity (like “police,” “county,” and “state”)

Step 2: Hire a Resident Agent

The next step in starting an S-corp in Louisiana is hiring a Resident Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents (such as subpoenas), all notices of lawsuits, and other official government correspondence. Forming an LLC with an S-corp will be easier if you have Resident Agent in Louisiana.

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Step 3: File For Articles of Organization

The Articles of Organization is an important document to start your limited liability company (LLC). Louisiana Articles of Organization is a simple document that contains the business name and address as well as the name and address of the person who received lawsuits on behalf of the organization. For the Articles of Organization to be filed in ME Secretary of State, you need to pay a filing fee of $100. In Louisiana, the filing fee of forming an LLC is $100.

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Step 4: Creating an Operating Agreement

After you have filed your Articles of Organization, the next step is to create an operating agreement in Louisiana. The operating agreement is essential and necessary since it will cover your corporation’s important documentation and rules. The operating agreements usually include the following:

  • Article I: Organization
  • Article II: Management and Voting
  • Article III: Capital Contributions
  • Article IV: Distributions
  • Article V: Membership Changes
  • Article VI: Dissolution

After creating the LLC operating agreement, you can benefit in several ways since it will discuss how decisions for the business will be made, including management and member voting structure.

Step 5: Request for an EIN

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your general partnership. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in Louisiana can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

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Step 6: File Form 2553 for your S-Corp Business

Once you have obtained your EIN and Articles of Organization to form an S-Corp, you must file Form 2553, Election by a Small Business Corporation, to apply for S-corp status. Filing a form 2553 should be done 75 days after the formation of your S-Corp, or at most 75 days after the beginning of the tax year in which the election is to take effect.

If your LLS-Corp has passed the deadline of 75 days, you must also file Form 8832, Entity Classification Election, to opt to be taxed as a corporation. Then you would send Form 2553 and Form 8832 jointly by certified mail from the USPS.

In Louisiana, you can file your form 2553 in the Department of the Treasury Internal Revenue Service Center – Ogden, UT 84201 Fax: 855-214-7520 .

Costs of Forming an S-Corporation

There are several costs associated with forming an S-Corporation in Louisiana, including:

  1. Filing Fees: When forming a corporation in Louisiana, you must file Articles of Incorporation with the Louisiana Secretary of State and pay a filing fee of $75 for filing online, fax, in person and by mail.
  2. Statement of Information: After forming the corporation, you must file a Statement of Information (Form SI-550) within 90 days and pay a filing fee (currently $25). This statement must be filed annually after that.
  3. Franchise Tax: S-Corporations in Louisiana are subject to the annual franchise tax, which is the greater of a minimum tax (currently $800) or a calculated tax based on the corporation’s net income.
  4. Other Costs: Depending on the nature of your business, additional costs may include obtaining licenses and permits, registered agent services, and professional fees for legal and accounting services.

Advantages of Forming an S-Corporation

There are numerous advantages to incorporating an S-Corp, but you should be aware of certain problems. Consider the following benefits of an S corporation:

Pass-through Taxation

S-Corporations enjoy pass-through taxation, which helps to avoid the double taxation faced by C-Corporations. This can result in potential tax savings for shareholders. Pass-through taxation is a tax system where the income, deductions, and credits generated by a business entity, such as Louisiana General Partnership, limited liability company (LLC), or S-Corporation, are passed through to individual owners or shareholders instead of being taxed at the corporate level.

In this system, business profits and losses are reported on the owners’ or shareholders’ individual tax returns, and taxes are paid at their individual income tax rates. This avoids the issue of double taxation, which occurs in C-Corporations where income is taxed at both the corporate level and again when distributed to shareholders as dividends. Pass-through taxation is generally advantageous for small businesses and their owners, as it simplifies tax filings and often results in lower overall taxes.

Limited Liability Protection

Shareholders of an S-Corporation have limited liability protection, meaning their personal assets are protected from the corporation’s debts and obligations. Limited liability protection in an S-Corporation refers to the legal separation between the personal assets of the shareholders (owners) and the business assets, which protects shareholders from being personally responsible for the company’s debts and legal obligations.

In an S-Corporation, shareholders’ personal assets, such as their homes, cars, and personal savings, are not at risk if the business faces financial difficulties or lawsuits. The shareholders’ liability is limited to the amount they have invested in the company. This limited liability is a significant advantage of incorporating a business as an S-Corporation, as it provides a safeguard for the personal financial well-being of the business owners.

It is important to note that limited liability protection can only be supported if the shareholders maintain proper corporate formalities, such as keeping separate business and personal finances, holding regular shareholder meetings, and maintaining accurate business records. In such cases, courts may “pierce the corporate veil” and hold shareholders personally liable for the company’s debts and obligations.

Transferability of Shares

Shares in an S-Corporation are more easily transferable than those in an LLC, allowing for greater flexibility in ownership changes. Transferability of shares in an S-Corporation refers to the ability of shareholders to sell, gift, or otherwise transfer their ownership interest in the company to another person or entity. This is an important aspect of an S-Corporation’s structure, as it allows for flexibility in ownership and the potential for raising capital through the sale of shares.

However, there are certain restrictions on the transferability of shares in an S-Corporation, which are imposed by the Internal Revenue Service (IRS) to maintain the company’s eligibility for S-Corp status:

  • Shareholders: The number of shareholders in an S-Corporation is limited to a maximum of 100. Only individuals, certain trusts, and estates can be shareholders; other corporations and partnerships are generally not allowed.
  • Eligible Shareholders: Only U.S. citizens and resident aliens can be shareholders in an S-Corporation. Non-resident aliens are not allowed to hold shares.
  • One Class of Stock: S-Corporations can only have one class of stock. All shares must have the same rights and privileges, such as voting rights and distribution preferences. However, differences in voting rights are allowed if they are not tied to economic rights (e.g., distribution preferences).
  • Perpetual Existence: Perpetual existence refers to the concept that a business entity, such as an S-Corporation, can continue to exist indefinitely, regardless of changes in ownership or management. This means the corporation can outlive its original founders and shareholders and continue to operate even if individual shareholders pass away or decide to sell their shares.

This characteristic of an S-Corporation provides stability and continuity for the business, as it ensures that the corporation’s operations, contracts, and legal obligations remain unaffected by changes in ownership. It also makes it easier for the company to attract investors and raise capital. Potential investors can be confident that the business will continue to exist even if the original owners are no longer involved.

Disadvantages of Forming an S-Corporation

Despite these advantages, moving to an S corporation only sometimes makes sense – or at the very least, necessitates a thorough review of certain situations. The following issues may arise in particular:

Restrictions on Shareholders

S-Corporations are subject to specific restrictions, such as a maximum of 100 shareholders and limitations on the types of eligible shareholders (e.g., only individuals, certain trusts, and estates).

Single Class of Stock

S-Corporations are limited to issuing only one class of stock, which can limit flexibility in raising capital or creating different ownership structures. A single class of stock in an S-Corporation refers to the requirement that the corporation only issues one type of stock with equal rights and characteristics for all shareholders. This means that all shares of stock must have the same economic rights, such as dividend distribution preferences and liquidation rights, as well as voting rights. The single class of stock requirement is one of the key criteria the Internal Revenue Service (IRS) sets for a corporation to qualify for S-Corp status.

Increased Complexity

Forming and maintaining an S-Corporation requires more paperwork, record-keeping, and compliance with state and federal regulations than simpler structures like LLCs.

Franchise Tax

S-Corporations in Louisiana are subject to the annual franchise tax, which can financially burden some businesses.

In an Louisiana S-Corporation context, the franchise tax is usually based on the company’s income, net worth, or a combination of both. Since S-Corporations are pass-through entities for federal income tax purposes, meaning that their income is not taxed at the corporate level but rather passed through to individual shareholders, they may be exempt from or subject to lower franchise tax rates in some states than traditional C-Corporations.

However, S-Corporations must still comply with Louisiana franchise tax requirements, which may include annual filings and tax payments. It is crucial for S-Corporation owners to understand the specific rules and regulations in their state of operation and to consult with a tax professional to ensure compliance and minimize their tax.

FAQs

What is an S-Corporation?
An S-Corporation is a type of corporation that provides a company with the benefits of incorporation while avoiding double taxation of their business income.
Is forming an S-Corporation right for my business in Louisiana?
That depends on your business structure, goals, and financial situation. It’s best to get advice from a tax professional who can help you decide.
How do I start an S-Corporation in Louisiana?
You can start an S-Corporation by filing Articles of Incorporation with the Louisiana Secretary of State, and by obtaining the necessary licenses and permits.
Are there any filing fees for starting an S-Corporation in Louisiana?
Yes, there are fees for filing Articles of Incorporation with the Louisiana Secretary of State. The amount varies depending on the type of corporation you are forming.
What taxes will be required for my S-Corporation in Louisiana?
S-Corporation shareholders are taxed only on their share of the company’s income at their individual income tax rate. The company will not pay federal taxes on its earnings, but Louisiana requires S-Corporations to file a state income tax return.
Can anyone in Louisiana start an S-Corporation?
Yes, as long as the person meets the requirements for forming a corporation in Louisiana.
Do I have to hold shareholder meetings in Louisiana for an S-Corporation?
Yes, S-Corporations are required to hold meetings and keep records of these meetings.
Can my Louisiana-based S-Corporation have any number of shareholders?
In Louisiana, an S-Corporation can have no more than 75 members/shareholders
Can my S-Corporation in Louisiana go public?
An S-Corporation cannot go public; it is a private company owned by its shareholders.
Does forming an S-Corporation protect my personal assets in Louisiana?
Yes, similar to a traditional corporation, an S-Corporation provides personal asset protection for its shareholders by separating their personal assets from the business.
Can I convert my existing Louisiana-based business into an S-Corporation?
Yes, you can convert an existing Louisiana-based business into an S-Corporation, but it’s important to consider the tax consequences and seek advice from a professional.
How do I qualify for S-Corporation status in Louisiana?
In Louisiana, you must first incorporate your business as either an LLC or a corporation, and then elect S-Corporation status by filing a Form 2553 with the IRS.
How often do I have to file an annual report for my S-Corporation in Louisiana?
In Louisiana, an S-Corporation is required to file an annual report with the Secretary of State by the end of the anniversary month that your corporation was formed.
Do I need to maintain certain records and accounts for my S-Corporation in Louisiana?
Yes, S-Corporations in Louisiana are required to keep accounts, records, minutes, and other documents showing the operation and business activities of the corporation.
Is Louisiana-based S-Corporation taxed at the same rate as other corporations?
No. Louisiana generally follows federal guidelines for taxing S-Corporations, but assesses a separate state corporate income tax.
Are there any annual franchise taxes payable by S-Corporation in Louisiana?
Louisiana does not impose franchise taxes, but there is a no-par stock fee for cost consideration.
Can a foreigner be a shareholder in a Louisiana-based S-Corporation?
Yes, a foreigner can be a shareholder in a Louisiana-based S-Corporation
Can a resident of Louisiana incorporate in a different state for an S-Corporation?
Yes, you can incorporate your S-Corporation in a different state, but you will need to qualify your corporation as a foreign entity in Louisiana and pay additional fees.
What specific activities are not allowed under Louisiana’s S-Corporation status?
S-Corporation status cannot be used by insurance companies and domestic international sales corporation and Louisiana offers its employees shareholders certain fringe benefits and granting employees discounted shares.
How long does Louisiana take to approve an S-Corporation?
After filing Articles of Incorporation with the Louisiana Secretary of State, it may take several days to several weeks, based on the volume of requests and workload of the office.
What happens if my corporation does not qualify at the federal level?
If this is the case for the S-corporation in Louisiana, it will not be treated as an S-corporation for Louisiana tax purposes.
Can I elect S-Corporation treatment after I incorporate with the Louisiana Secretary of State?
The S-Corporation treatment requires filing a separate tax election with the IRS after incorporation with the secretary of state.
What happens to the losses in an S-Corporation in Louisiana?
Since shareholders of an S-Corporation are taxed on their share of profits. Net losses of business will be passed onto the shareholders to add this amount to their individual tax returns.
How can I obtain S-Corporation status in Louisiana?
Contact the Internal Revenue Service to receive a form, and then Kansas Dept. of Revenue to verify eligibility and double-check proper NJ requirements and filing, recognized by state and federal laws.
Does an S-Corporation in Louisiana need to have a board of directors?
No, it’s not mandatory. Most S-Corporations in Louisiana elect officers rather than directors to meet the legal requirement.
Can an S-Corporation be sued in Louisiana?
Yes, S-Corporations can be sued in any legal judgment resulting personally to directors, shareholders government parties will not hold personal liability in Louisiana.
Is registration of the corporate name mandatory in Louisiana?
You are required to register an assumed name (DBA) with the Louisiana Secretary of State in Los Angeles to utilize a name that is not your LLC’s or corporation’s formal name.
Can a foreign LLC become an S-Corporation in Louisiana?
There is no need for an LLC to be foreign for the purposes of becoming an S-Corporation in Louisiana, but it can. It should verify the state’s tax classification requirements first.
Are there any restrictions in the availability of charitable donations made by an S-Corporation in Louisiana?
Similar to most states, numerous guidelines limit the availability of charitable contribution deductions allowed by Louisiana. Most deductions given for considerations given to charity will fall under strict regulations.
Do I need to incorporate in Louisiana to start an S-Corporation in Louisiana?
Yes, you need to file articles of incorporation with the Louisiana Secretary of State to form an S-Corporation in Louisiana.
What are the advantages of an S-Corporation in Louisiana?
Some advantages of an S-Corporation in Louisiana include pass-through taxation, limited personal liability, and fewer restrictions on shareholders.
Can non-residents of Louisiana start an S-Corporation in Louisiana?
Yes, non-residents can start an S-Corporation in Louisiana.
Is it necessary to have a certain number of shareholders to start an S-Corporation in Louisiana?
No, you can start an S-Corporation in Louisiana with just one shareholder.
Can an S-Corporation in Louisiana have foreign shareholders?
Yes, an S-Corporation in Louisiana can have foreign shareholders.
What are the differences between an LLC and an S-Corporation in Louisiana?
One key difference between an LLC and an S-Corporation in Louisiana is that S-Corporations must have a board of directors, while LLCs do not.
Can an S-Corp in Louisiana own other types of businesses or subsidiaries?
Yes, an S-Corporation in Louisiana can own other businesses or subsidiaries.
Does Louisiana have any special requirements for S-Corporations?
Yes, Louisiana requires S-Corporations to comply with certain regulations and pay certain taxes, like the Louisiana income tax.
How do I determine if an S-Corporation is right for my Louisiana business?
You should consult with a licensed attorney or business consultant to determine whether an S-Corporation is the best choice for your Louisiana business.
What types of businesses are eligible to file as S-Corporations in Louisiana?
Any type of business can file as an S-Corporation in Louisiana, as long as it meets the IRS requirements for an S-Corporation.
How do I maintain my S-Corporation status in Louisiana?
To maintain your S-Corporation status in Louisiana, you must meet certain ongoing requirements, such as filing annual state and federal tax returns.
What happens if I don’t comply with S-Corporation regulations in Louisiana?
If you fail to comply with S-Corporation regulations in Louisiana, you could face penalties, fines, or other legal consequences.
Do all S-Corporations in Louisiana have to pay the Louisiana franchise tax?
Yes, all S-Corporations in Louisiana are subject to the Louisiana franchise tax.
What is the Louisiana franchise tax rate for S-Corporations?
The Louisiana franchise tax rate for S-Corporations varies based on the corporation’s net income.
How do I apply for S-Corporation status in Louisiana?
To apply for S-Corporation status in Louisiana, you must file form 2553 with the IRS and provide certain information to the Louisiana Secretary of State.
How long does it take for the Louisiana Secretary of State to process S-Corporation formation paperwork?
The processing time for S-Corporation formation paperwork in Louisiana varies by business and filing method.
Can I change my Louisiana company’s status from an LLC to an S-Corporation?
Yes, you can change your Louisiana company’s status from an LLC to an S-Corporation by making certain tax elections.
Are there any restrictions on Louisiana S-Corporation ownership?
Yes, ownership of Louisiana S-Corporations is limited to individuals or certain trusts and estates.
Can I choose a different tax status than S-Corporation for my Louisiana business?
Yes, you can choose a different tax status than S-Corporation for your Louisiana business.
How much does it cost to file for S-Corporation status in Louisiana?
The cost of filing for S-Corporation status in Louisiana varies based on various factors, such as the number of shareholders.
How do I file the required documents to create an S-Corporation in Louisiana?
To create an S-Corporation in Louisiana, you must file the appropriate forms with the Louisiana Secretary of State.
Can I keep my Louisiana S-Corporation status if I move to another state?
Your Louisiana S-Corporation status may be affected if you move to another state, and you should consult with a licensed attorney or business consultant to understand the requirements.
What is the difference between S-Corporation and C-Corporation in Louisiana?
One significant difference between S-Corporations and C-Corporations in Louisiana is how they are taxed.
Can I convert my existing Louisiana corporation to an S-Corporation?
Yes, you can convert your existing Louisiana corporation to an S-Corporation by meeting certain requirements.
Can I start a nonprofit S-Corporation in Louisiana?
No, nonprofits cannot be S-Corporations in Louisiana.
Are S-Corporations in Louisiana allowed to have vesting schedules on stock options?
Yes, S-Corporations in Louisiana can use vesting schedules on stock options.
Can I change the name of my Louisiana S-Corporation after formation?
Yes, you can change the name of your Louisiana S-Corporation after formation by meeting certain Louisiana Secretary of State requirements.

Also Read

Why You Should Start Louisiana S Corp

One of the key benefits of starting an S Corp in Louisiana is the potential tax savings it can provide. Unlike a traditional C Corporation, an S Corp allows business owners to pass through income, losses, deductions, and credits to their personal tax returns. This means that, as a business owner, you can potentially avoid double taxation on your company’s profits.

Additionally, forming an S Corp in Louisiana can help you minimize self-employment taxes. When you operate as a sole proprietorship or partnership, you must pay self-employment taxes on all of your business income. However, as an S Corp owner, you can classify a portion of your income as salary and the remainder as distributions, which are not subject to self-employment taxes.

Another advantage of starting an S Corp in Louisiana is the added credibility it can provide to your business. By incorporating your business as an S Corp, you demonstrate to potential customers, partners, and investors that you are committed to professionalism and stability. This can help you attract more clients, secure better partnerships, and access funding opportunities that may not be available to unincorporated businesses.

Furthermore, forming an S Corp in Louisiana can offer personal liability protection for business owners. As an S Corp shareholder, your personal assets are generally shielded from the debts and liabilities of the corporation. This means that, in most cases, your personal savings, home, and other assets are safe from potential lawsuits or financial claims against your business.

In addition to the financial and legal benefits, starting an S Corp in Louisiana can also provide you with greater flexibility in managing your business. S Corps allow for more options when it comes to ownership structure, management roles, and profit-sharing arrangements. This can be particularly advantageous for family-owned businesses, partnerships, or businesses with multiple stakeholders.

Overall, if you’re considering starting a business in Louisiana, forming an S Corp can be a strategic choice that may positively impact your bottom line, tax burden, legal protection, and operational flexibility. Before making any decisions, it’s important to consult with a qualified business attorney or accountant to ensure that an S Corp is the best fit for your specific circumstances and goals. By taking the time to weigh the pros and cons and seeking professional guidance, you can make an informed decision that paves the way for long-term success and growth for your business.

Conclusion

Forming an S-Corporation in Louisiana can be a beneficial decision for small business owners seeking liability protection, pass-through taxation, and easier transfer of ownership. By meeting the requirements set by the IRS and following the necessary steps, business owners can take advantage of an S-Corp’s unique structure and benefits. However, it is essential to consider the potential drawbacks, such as increased paperwork and limitations on ownership, before making a final decision. Consulting with a legal or financial professional can help business owners determine if an S-Corporation is right for their needs and goals.

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