For a small S Corporation (S Corp) in the U.S., there are a few basic legal requirements that must be followed. Here’s a simplified list of key S Corp requirements that are legally mandated, specifically relevant to your business (note: for anything legal, please consult an actual attorney as I am not that):
✅ 1. Corporate Formation
- Incorporate as a Corporation with the state (usually as a Professional Corporation, or PC, for medical practices).
- File Articles of Incorporation with your state’s business filing office.
- Some states require medical professionals to form Professional S Corporations specifically for health care services.
✅ 2. Elect S Corporation Status (IRS Requirement)
- File IRS Form 2553 to elect S Corporation status (must be done within 75 days of incorporation or the beginning of the tax year).
- All shareholders must sign Form 2553.
✅ 3. Comply with Licensing Laws
- All medical practitioners must have valid state medical licenses.
- The clinic itself may need a facility license or clinic permit, depending on your state.
- Follow any state-specific rules for medical corporations (e.g., ownership must be limited to licensed physicians in most states).
✅ 4. Corporate Governance
- Create corporate bylaws.
- Hold annual shareholder and director meetings.
- Keep minutes of meetings and maintain corporate records.
✅ 5. Reasonable Compensation
- As an owner-employee, you must pay yourself a reasonable salary for your role before taking any distributions.
- This is required by the IRS to avoid underpaying payroll taxes.
✅ 6. Separate Business Finances
- Open a business bank account.
- Do not mix personal and business finances.
- Maintain clear financial records and bookkeeping.
✅ 7. Annual Filings & Taxes
- File Form 1120-S (U.S. Income Tax Return for an S Corporation).
- Provide Schedule K-1 to each shareholder.
- File state income/franchise taxes as required.
- Issue W-2s for employees, and 1099s for independent contractors.
✅ 8. Maintain Good Standing
- File annual or biennial reports with your state.
- Pay state business renewal fees.
- Maintain registered agent service for receiving legal documents.