Corporate Status Vs S Corporation Status In Michigan
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FAQ
We recommend converting to a C-Corp if a company wants to issue qualified small business stock and plans on selling its business in no less than five years.
These different business entities include sole proprietorships, copartnerships, limited liability partnerships, limited partnerships, corporations, and limited liability companies.
The C corporation is the standard (or default) corporation under IRS rules. The S corporation is a corporation that has elected a special tax status with the IRS and therefore has some tax advantages. Both business structures get their names from the parts of the Internal Revenue Code that they are taxed under.
Michigan recognizes the federal S corporation election and does not require a state-level S corporation election.
Names of corporations must end with either the identifier "Incorporated" or "Corp." If one of these identifiers is present, then the company is most likely a corporation.
Filing as an S Corp in Michigan Step 1: Choose a Business Name. Step 2: Appoint Directors and a Registered Agent. Step 3: File Articles of Incorporation. Step 4: Create S Corp Bylaws. Step 5: Apply for an Employer Identification Number. Step 6: File Form 2553 for S Corporation Election.
File form to apply for S corp status Once your Michigan LLC is approved by the state, you need to file Form 2553, Election by a Small Business Corporation, to get S corp tax designation.
A C corporation, or C corp, is a business structure with a separate legal identity from its owners. A C corp is created by filing articles of incorporation with the relevant government organization.
Because of the one-class-of-stock restriction, an S corporation cannot allocate losses or income to specific shareholders. Allocation of income and loss is governed by stock ownership, unlike partnerships or LLCs taxed as partnerships where the allocation can be set in the partnership agreement or operating agreement.
