Hello Choontan,
Thanks for the questions. I will do what I can to answer these questions in general:
Whether you should form an LLC or an S Corp requires some in-depth analysis that cannot be provided in this forum. It may be best to engage a qualified tax pro to answer this question. There are state laws and other issues that vary from state to state. Not to mention a comprehensive understanding of your business operations and goals.
The steps to form an entity vary from state to state. In general, it may be best to engage an experienced CPA or attorney when creating a State entity. CPAs cannot draft legal documents, an attorney is required for that.
There are various online sites that can help with this that layout the steps and costs.
Some basic steps are:
- Check with the Secretary of State for name availability of your entity
- File the required forms
- Pay the fee
- Determine the structure of the entity (C Corp, S Corp, LLC, LLP, etc.)
- Articles of Incorporation or an LLC member agreement must be drafted
- Obtain Federal EIN
In general, a multi-member LLC will be classified as a partnership by the IRS initially. You have the option to be taxed as a partnership, a C Corp, or an S Corp. Partnerships and S Corps are pass-thru entities and you pay the tax based on your individual rate which can be as high as 37% plus other taxes depending on your income level. C Corps are currently taxed at flat 21% on the federal level. There are many considerations to know which entity is best for tax purposes.
Use Form 8832, Entity Classification Election to make an election to be taxed as a corporation. Use Form 2553, Election by Small Business Corporation to make an election to be an S corporation. If a taxpayer doesn't file Form 2553, the default classification will apply.
A corporation or LLC must file an S-Corp election within two months and 15 days (~75 days total) of the date of formation for the election to take effect in the first tax year.
Your spouse does not have to be an owner or a member to work for your entity. Other issues may need to be considered here.
Here is a link that discusses the pros and cons of various small business entities.
In regard to software, here is a link that provides some details about Intuit products.
I hope this helps.
