Starting an S corporation (S corp) in Georgia is easy, and electing an S corp tax designation could potentially save your business money in taxes. Our guide will walk you through the process of starting your Georgia S corporation and provide you with tips on maintaining your S corp.
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 Tailor Brands 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 Requirements
The IRS requires that businesses that elect S corp status have the following:
- Have 100 shareholders or less
- Are domestic LLCs or corporations
- Issue only one class of stock
- Shareholders are U.S. citizens or permanent resident aliens
- Are owned by private individuals
Are S Corp Tax Advantages Right for You?
An S corporation is a tax designation that can be elected by an 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 IRS when you request your employee identification number (EIN)
- By forming a corporation and electing S corp status from the IRS
We recommend not starting a corporation with the S corp tax status because the S corp negates all of the benefits of a corporation.
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 Tailor Brands 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.
OPTION 1: File Online With Georgia eCorp
- OR -
OPTION 2: File Form CD 030 by Mail or in Person
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:
Ready to start saving on your taxes?
We recommend using a formation service to start your Georgia S corp for you, so you can focus on the things that matter most — growing your business.
Keep Your Georgia S Corp Compliant
In order to remain compliant with Georgia state laws, after forming your company and electing S corp tax status, you will need to 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.
Georgia S Corp Annual Registration
Every year you will need to file an Annual Registration with the state of Georgia. This document informs the state of any changes to your business, and you will need to file it every year before April 1st with the Georgia Secretary of State. Even if your business does not change from one year to the next, you will still need to file an Annual Registration. Failure to file an Annual Registration will result in the dissolution of your business.
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, if you receive income from a Georgia source, you will need to pay Georgia income tax. Georgia’s income tax is based on a gradual system and individuals will owe anywhere from 1% to 5.75% on their income. Some states have income tax rates of 0%, while others have rates closer to 10%. Georgia’s gradual tax rates fall somewhere in the middle when compared to other states.
Register for a Georgia State Taxpayer ID Number
You will need to apply for a Georgia State Taxpayer ID Number with the Georgia Department of Revenue Tax Center in order to collect and file sales tax with the state. We recommend doing this before you begin doing any business transactions.
Georgia Sales and Use Tax
Georgia has a state sales tax rate of 4%. Many local jurisdictions have an additional local sales tax rate, but the state caps local sales tax at 4.9%. Overall, Georgia sales tax averages around 7% when the local and state sales tax rates are added together. Check your local jurisdiction’s sales tax rate to understand how much you will need to pay in sales tax.
To learn more, check out the Georgia Department of Revenue’s website.
Additional State Taxes
Georgia’s Department of Revenue oversees state taxes, and your business may be required to pay additional taxes depending on its location, industry, and how many employees you have.
Examples of additional taxes Georgia businesses may be required to pay include:
- Withholding Tax
- International Fuel Tax Agreement (IFTA)
- Motor fuel distributor tax
- Alcohol tax
- Tobacco tax
- Coin operated amusement machines tax
Visit the Georgia Department of Revenue’s website to learn more.
Georgia Local Taxes
Whether you are in Atlanta, Savannah, or a smaller rural area, your business may be responsible for obtaining local permits or paying additional local taxes. We recommend you check with your local jurisdiction to learn more about laws governing your business.
Start a Georgia S Corp FAQ
What is an S corp?
An S corporation (S corp) is a tax designation for which an LLC or a corporation can apply.
Are taxes for LLCs and S corps the same?
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.
What is a reasonable salary for an S corp?
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.
What is a distribution?
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.
Can I still use my DBA name if I elect to be an S corp?
LLCs and corporations that operate under a “doing business as” (DBA) name can choose the S corp election.