How to Form a S Corporation in Vermont

In Vermont, you may incorporate a S corporation (S corp) by founding a limited liability company (LLC) or a corporation and then choosing S corp status from the IRS when applying for an EIN.

An S corporation is a tax categorization, not a company structure, according to the IRS. The S corp classification is used to lower a company’s tax burden.

In our How to Start a S Corp in Vermont tutorial, we’ll walk you through the steps.

Considerations Before Forming a S Corp

You must examine the following things before founding a S corporation:

Is a S corporation the best option for your company?
S corporation limitations
Why is an LLC the ideal structure for the S corporation tax status?
Are the tax benefits of a S corporation good for you?

Is a S Corporation the Best Business Structure for You?

Considerations Before Forming a S Corp

You must examine the following things before founding a S corporation:

Is a S corporation the best option for your company?
S corporation limitations
Why is an LLC the ideal structure for the S corporation tax status?
Are the tax benefits of a S corporation good for you?

Is a S Corporation the Best Business Structure for You?

How to Form a S Corporation

There are two major methods to form a S corporation:

When requesting your employee identification number, organize an LLC and obtain S corp tax status from the IRS (EIN)
By creating a company and applying to the IRS for S corp status

We do not advocate forming a company with the S corp tax status since it undermines all of the advantages of forming a corporation.

Forming an LLC and Choosing S Corp Status in Vermont

To form an LLC and elect S corp status, follow these five simple steps:

Step 1: Give Your LLC a Name

Step 2: Select a Registered Agent.

Step 3: Submit the Articles of Incorporation.

Create an Operating Agreement in Step 4

Step 5: Obtain an EIN and submit Form 2553 to elect S Corporation tax status.

Step 1: Give Your LLC a Name

The first and most significant step in forming an LLC in Vermont is deciding on a name.

Make sure your name conforms with Vermont naming regulations and is readily searched by prospective customers.

1. Follow the Vermont LLC naming guidelines:

Your firm’s name must contain the words “limited liability company” or “limited company” or one of its acronyms (LLC, L.L.C., LC, or L.C.). The words “limited” and “company” may both be shortened as “Ltd.” and “Co.”

A low-profit limited liability company’s name must include the acronym “L3C.”

Your name cannot include terms or phrases that, when used incorrectly, indicate governmental association.

Your name cannot include terms or phrases that insult or slander persons or groups based on their race, color, religion, ancestry, national origin, sex, sexual orientation, gender identity, place of birth, age, or handicap.

Your name cannot include words or phrases that show or describe sexual or excretory organs, or the actions or products associated with them, in context.

Your name cannot include words or phrases that, in context, appeal to the prurient desire; or portray, describe, or suggest sexual behaviour in manner that are clearly obscene or menacing.

Restricted terms (e.g., bank, attorney, university) may need extra documentation and the participation of a licensed professional, such as a doctor or lawyer, in your LLC.

Your name must be distinct from any other current company in the state. This covers reserved names in Vermont.

2. Does the name exist in Vermont? To determine whether your selected LLC name is available, utilize the business entity search on the Vermont Secretary of State website.

3. Is the URL accessible?

We suggest that you check to see whether your company’s name is accessible as a web domain. Even if you don’t intend to construct a company website right away, you may want to purchase the URL to prevent others from gaining it.

Step 2: Select a Vermont Registered Agent

Your Vermont LLC must have a registered agent.

A registered agent for your LLC will accept legal papers and tax notifications on your behalf. When you submit your LLC’s Articles of Organization, you will name your registered agent.

Many company owners opt to use the services of a registered agent. Many of these firms will incorporate your LLC for a modest price and provide free registered agent services for the first year.

Step 3: Submit the Articles of Organization for the Vermont LLC.

To properly register an LLC, the Vermont Articles of Organization are utilized.

Step 4: Draft an Operating Agreement for your LLC.

An LLC operating agreement is a legal document that defines your LLC’s ownership and member responsibilities.

Read our Vermont LLC Operating Agreement guide for more details.

Step 5: Apply for an EIN and fill out Form 2553 on the IRS website.

An EIN is a number assigned by the US Internal Revenue Service (IRS) to companies in order to identify and tax them. It is basically a business’s Social Security number.

When you apply directly with the IRS, EINs are free.

Select S Corporation Tax Status
The IRS will give a link to Form 2553, the Election by a Small Business form, during the online EIN application process.