Finally finished with all the paperwork (I hope!) needed to establish The Copyeditor’s Desk as an S-corporation. Incorporating my multifarious freelance enterprises as a single entity will make it possible for me to earn enough to live on despite the government’s strictures on earned income for those who take so-called “early” Social Security—a limit guaranteed to keep all but the wealthiest investors in poverty.
It wasn’t as complicated as I feared. But of course, having an ex- who’s a corporate lawyer works to decomplicate these projects.
Here are the steps you take to form an S-corporation in Arizona (it could be different in other states, so don’t take my word for it):
1. Check with the government for availability of your proposed corporate name.
2. Fill out a form called “Articles of Incorporation” and another form called a “Certificate of Disclosure.”
3. Send these with a cover sheet and a check for $85 to the Arizona Corporation Commission.
4. Apply for an EIN through the federal Internal Revenue Service.
5. Fill out and mail IRS form 2553 to tell the feds you’re electing to be an S-corporation.
Once you’ve jumped through these hoops, you have the paperwork necessary to open a business account with your bank or credit union. Eventually you should receive confirmation and still more paper from the various bureaucracies, at which point you can start behaving like a corporation. In Arizona, you have to publish the articles of incorporation for three days running in a local newspaper, a pricey proposition, and you’re supposed to submit an annual report. The latter is something you discuss with your tax professional.
It’s a little more involved than that, of course, but the basic steps are less difficult than they appear. Funny about Money, which will be part of this corporation, is already making a little cash, so I’m looking forward to having a bank account into which to deposit it. Let’s hope that by next year it will earn enough to spring me free of one or two sections of freshman comp!
😀
And this is the type of thing that would allow you to purchase supplies wholesale and would protect your personal property if the corporation were to go defunct?
Elaborate on the tax advantages. My husband and I have recently discussed this very thing.
@ Terri: Afraid you’ll need to talk with a tax professional about those issues. I am neither a tax professional nor a lawyer.
It’s my understanding that a corporation is its own entity and is taxed in that way, but there are many permutations of “corporation.” With an S-corp, the directors have to pay themselves a “reasonable” salary (determined at whim by the IRS if whatever you come up with is not regarded as “reasonable”) and then can draw “dividends” from the rest of the revenue. The way it has been explained to me, these dividends are not regarded as income to be counted against Social Security benefits when you are under “full retirement” age, and that is the sole benefit of the arrangement for me.
What circumstances allow you to buy supplies wholesale, I do not know.