How to Start an S Corp in Georgia
Starting a business in Georgia can give you access to one of the most supportive business landscapes in the country. With this state’s reliable infrastructure, educated and skilled workforce, and attractive tax structure, you can succeed in your entrepreneurial journey in Georgia.
Structuring your business as an S corporation (S corp) in Georgia can help you save money on your annual taxes. This guide provides the information you need to form your Georgia S corp as well as tips to help you keep it in good standing with the state.
Want to form an S corp elsewhere? Check out our other How to Start an S Corp guides to learn more.
We recommend using a professional formation service like Northwest to get your S corp up and running in no time.
Factors to Consider Before Starting an S Corp in Georgia
Before forming an S corp, you have to consider the following factors:
- Is an S corporation the best strategy for your business?
- S corporation requirements and restrictions
- Are S corp tax advantages right for you?
Is an S Corporation the Best Strategy for Your Business?
For help with choosing the right structure for your business, visit our Choosing a Business Structure guide.
S Corporation Restrictions
S corps have several restrictions, such as being limited to one class of stock and 100 shareholders. Read our What Is an S Corporation guide for full details.
Are S Corp Tax Advantages Right for You?
An S corporation is a tax designation that can be elected by a limited liability company (LLC) or corporation. With an S corp, business owners are considered employees of the company and must receive a reasonable salary. Since all S corps technically have employees, the s corp must run payroll.
In order to benefit from a Georgia S corp tax designation, your business needs to make enough money to offset payroll expenses. Furthermore, S corps are beneficial for business owners who take large distributions in addition to their salary.
How to Form a Georgia S Corp
There are two main ways to start an S corp:
- By forming an LLC and electing S corp tax status from the Internal Revenue Service (IRS) when you request your employee identification number (EIN)
- By forming a corporation and electing S corp status from the IRS
We recommend forming an LLC because it’s simpler and more cost-effective.
Recommended: If you have an existing LLC, visit our How to Convert an LLC to S Corp guide.
Steps for Forming an LLC and Electing S Corp Status in Georgia
Starting a Georgia LLC and electing S corp tax status is easy. You can use our guides to start an LLC with the S corp status yourself, or you can hire a service provider like Northwest to guide you through this process.
There are five basic steps to start an LLC and elect S corp status:
Step 1: Name Your LLC
Step 2: Choose a Registered Agent
Step 3: File the Articles of Organization
Step 4: Create an Operating Agreement
Step 5: Get an EIN and File Form 2553 to Elect S Corp Tax Status
Step 1: Name Your LLC
Choosing a company name is the first and most important step in starting your LLC in Georgia.
Be sure to choose a name that complies with Georgia naming requirements and is easily searchable by potential clients.
1. Follow the naming guidelines for a Georgia LLC:
Your name must contain one of the following terms or abbreviations: limited liability company, limited company, L.L.C., LLC, L.C., or LC. It is permitted to abbreviate the word "limited" as "ltd." and the word "company" as "co."
Your name must be distinguishable from all other entities on file with the Georgia Secretary of State.
Your name cannot exceed 80 characters.
You must get approval from the Georgia Office of Insurance and Safety Fire Commissioner to use one of the following words: insurance, assurance, surety, fidelity, reinsurance, reassurance, or indemnity.
You must get approval from the Georgia Department of Banking and Finance to use one of the following words: bank, banc, banque, banker, banking company, banking house, bancorp, bankruptcy, credit union, savings & loan, trust, or trust company.
You must get approval from the Georgia Nonpublic Postsecondary Education Commission to use the words “college” or “university."
Your name cannot include words that could confuse your LLC with a government agency (FBI, Treasury, State Department, etc.).
You can find state-specific LLC naming guidelines on the Georgia Secretary of State website.
You can also read the Georgia state statute about LLC naming guidelines for more information.
2. Is the name available in Georgia? You can use the eCorp business search on the Georgia Secretary of State website to see if your desired LLC name is available.
3. Is the URL available? We recommend checking to see if your business name is available as a web domain. Even if you don't plan to create a business website today, you may want to buy the URL in order to prevent others from acquiring it.
Find a Domain Now
Step 2: Choose Your Georgia Registered Agent
You must elect a registered agent for your Georgia LLC.
An LLC registered agent will accept legal documents and tax notices on your LLC's behalf. You will list your registered agent when you file your LLC's Articles of Organization.
Many business owners choose to hire a registered agent service. Many of these services will form your LLC for a small fee and include the first year of registered agent services for free.
Step 3: File the Georgia LLC Articles of Organization
The Georgia Articles of Organization is used to officially register an LLC.
File Your Georgia Articles of Organization
OPTION 1: File Online With Georgia eCorpFile Online
- OR -
OPTION 2: File Form CD 030 by Mail or in PersonDownload Form
State Filing Cost: $100, payable to the Secretary of State (Nonrefundable)
Corporations Division 2
Martin Luther King Jr. Dr.
SE, Suite 313 West Tower
Atlanta, GA 30334
Note: You must file Form CD 231: Transmittal Information Form along with your Articles of Organization
Step 4: Create an LLC Operating Agreement
An LLC operating agreement is a legal document that outlines the ownership and member duties of your LLC.
For more information, read our Georgia LLC Operating Agreement guide.
Our operating agreement tool is a free resource for business owners.
Step 5: Get an EIN and Complete Form 2553 on the IRS Website
An EIN is a number that is used by the US Internal Revenue Service (IRS) to identify and tax businesses. It is essentially a Social Security number for a business.
EINs are free when you apply directly with the IRS.
Elect S Corp Tax Status
During the online EIN application, the IRS will provide a link to Form 2553, the Election By a Small Business form.
Visit our Form 2553 Instructions guide for detailed help with completing the form.
This is the form to elect S corp tax status for your LLC:
Keep Your Georgia S Corp Compliant
In order to remain compliant with Georgia state laws after you form your business and elect S corp status, you must file an annual registration and apply for a Georgia taxpayer ID number. Then, it’s your responsibility to obtain the necessary permits and pay your business’s taxes on time.
Georgia S Corp Annual Registration
Every year, you’ll need to file an annual registration before April 1 with the Georgia Secretary of State. This document informs the state about any changes to your business. Even if your business doesn’t change from one year to the next, you must still file an annual registration. Failure to do so will result in the dissolution of your business.
Visit our step-by-step Georgia Annual Registration guide for more information.
Georgia S Corp Taxes
S corporations benefit from pass-through taxation, meaning the business’s profits pass-through to S corp owners’ individual tax returns. S corp owners make money from their reasonable salary and distributions, and Georgia S corp owners can expect to pay the following taxes:
Federal Self-Employment Taxes
Self-employment taxes cover social security and medicare. The self-employment tax rate is 15.3%, and money you take as salary will be subjected to the self-employment tax. However, distributions are not subjected to this tax.
Federal Income Taxes
Your federal income taxes will depend on your tax bracket, and the cutoffs for individual tax brackets as well as the percent owed will change each year. Both your salary and distributions are subjected to federal income tax.
Georgia Income Taxes
Regardless of your state of residency, you must pay Georgia state income tax if you receive income from a Georgia source. Georgia has a graduated income tax that ranges from 1% to 5.75%, depending on an individual’s income bracket.
Some states have no income tax while others have rates closer to 10%. Georgia’s state income tax falls somewhere in the middle when compared to other states.
Register for a Georgia Taxpayer ID Number
You’ll need to apply for a Georgia taxpayer ID number with the Georgia Department of Revenue in order to collect and file sales taxes with the state. We recommend you do this before you start conducting business transactions.
Georgia Sales and Use Tax
Georgia has a state sales tax rate of 4%. While many local jurisdictions levy an additional sales tax on top of this, the state caps local sales tax rates at 4.9%.
When you combine local and state sales taxes, the average sales tax rate in Georgia is around 7%. Check with your local jurisdiction to confirm its sales tax rate to understand your business’s total sales tax obligation.
To learn more, visit the Georgia Department of Revenue website.
Additional State Taxes
The Georgia Department of Revenue also oversees other state-specific taxes your business may need to pay, depending on its location, industry, and number of employees. Here are a few examples of these additional taxes:
- Withholding Tax
- Motor Fuel Distributor Tax
- Alcohol Tax
- Tobacco Tax
- Coin-operated Amusement Machines Tax
Visit the Georgia Department of Revenue website to learn more.
Georgia Local Taxes
Whether you open your business in Atlanta, Savannah, or a smaller rural area, it may need to obtain local permits and/or pay additional local taxes. Check with your local jurisdiction to learn more about the local laws governing your business.
Start a Georgia S Corp FAQ
No. The default taxes for an LLC and taxes for an S corp are not the same.
With an S corp, owners pay personal income tax and self-employment tax on a predetermined salary. They may then withdraw any remaining profits from the business as a “distribution,” which isn’t subject to self-employment tax.
With an LLC, all company profits pass through to the owners’ personal tax returns, and then the owners must pay personal income tax and self-employment tax on the entire amount.
S corp owners are required to earn a “reasonable” salary, which basically means a fair market rate based on the individual’s qualifications as well as their duties and responsibilities at the company. The purpose of this requirement is to prevent S corp owners from paying themselves an artificially low salary in order to pay less self-employment tax.
A distribution is a dividend that a shareholder/owner can take from the business profits that remain after a company pays all of its employee salaries. Shareholders must pay personal income tax on distributions, but distributions aren’t subject to self-employment tax.
If you later decide you want to have the IRS tax your business as an S corp, you can update its tax status as long as you meet the IRS’s S corp requirements. Structuring your business as an S corp follows the same process and requires the same forms as an LLC — with just one simple extra step to get you set up.
Forming an S corp in Georgia can prove beneficial given its low statewide sales tax, supportive business climate, and graduated income tax rates that top out at 5.75%. You can save money on your taxes, which’ll enable you to reinvest more in the growth of your business.