Incorporating

• 1). Complete the initial steps to form a corporation. These steps include the creation of your articles of incorporation, your corporate bylaws, and division of shares of stock amongst the shareholders or owners of the company. There are services available online that can do this work for a fraction of what an attorney would charge.
  
  
• 2). Secure your company's employer identification number (EIN). This can be done free through the IRS website. The EIN will be used on all corporate documents, to open bank accounts, and to create a payroll for future employees.
  
  
• 3). Sign and notarize all documents. You will have to check with your individual state as to which documents need to be submitted. Once these steps are completed, you have a company. This company, if you wish it to be incorporated, will be considered a C-corp until the election for an S-corp is made.
  
  

Changing Your Status

• 1). Download and print a copy of Form 2553. Ideally Form 2553 is sent in with the paperwork for the initial incorporation of the new company. If this hasn't been done, it must be mailed within the first three months of the new corporation's creation, during its first tax year. If that deadline has passed, the corporation should file as a C-corp for the first tax year, and make the election for an S-corp before the third month of the following tax year.
  
  
• 2). Continue operations as normal while you are waiting to hear from the IRS. It is a rare occasion that a corporation is denied the S-corp status, but it does happen. The key is to continue doing business until you receive the acceptance letter.
  
  
• 3). Do not file taxes until you have received an acceptance or rejection letter. If need be, file for an extension as a C-corp until the letter arrives. To change the C-corp return to an S-corp return is not easy, and can end up costing you more in taxes.
  
  
• 4). Count the costs in changing the status from an S-corp back to a C-corp, if this is what you choose to do. There are very few reasons why the change from an S-corp to a C-corp would be a good idea. Perhaps your company is looking to go public and sell stock, but most financial and tax pros would caution against it. It would increase your taxes, wreak havoc with your accumulated adjustments account and more. If you still wish to do so, simply have all the shareholders sign an affidavit stating that they are revoking their S election, and send it in to the IRS. It must be a unanimous decision of all shareholders.