Despite being called S-corporations, S-corps aren’t necessarily required to include “Inc” or “Corp” as part of their legal business name. This is because the term “S-corp” doesn’t actually refer to a type of business entity, like an LLC or corporation. S-corp is a tax classification available to certain business entities—in fact, both LLCs and corporations can elect to file as S-corps, as long as they meet the IRS requirements. Businesses that file as S-corps must follow the naming rules for their entity type: an LLC must adhere to LLC naming rules, and a corporation must comply with the rules for naming corporations.
In this blog, we’ll provide you with an overview of what an S-corp is and how to name your S-corp based on your business entity type.
What is an S-Corporation?
An S-corp is not a type of business entity like an LLC or corporation. S-Corp is a federal tax election that some LLCs and corporations choose to file under in order to receive certain tax benefits. S-corps are taxed as pass-through entities, and distributions to shareholders or members aren’t subject to self-employment tax. By filing as an S-corp, a corporation can avoid the 21% federal corporate tax. Similarly, LLC members can pay less tax on non-salary income from distributions.
Below are common business entity types and the IRS tax elections available to each type:
|Business Entity Type||Possible Tax Elections|
|Single-Member LLC||– Sole Proprietorship (default)
|Multi-Member LLC||– Partnership (default)
|Corporation||– C-corp (default)
Changing Your Tax Election to S-corp
Your business must meet specific IRS requirements to qualify as an S-corp, including:
- Be a domestic entity
- Have 100 or fewer shareholders (for a corporation) or members (for an LLC)
- Shareholders/members must be individuals, estates, or certain trusts
- Shareholders/members cannot be non-resident aliens or other businesses classified as partnerships or corporations
- Have only one class of stock (for a corporation)
Many types of financial institutions are also excluded from filing as S-corps.
To change your tax election to S-corp, you’ll need to file Form 2553. Come tax time, you’ll submit Form 1120-S.
Naming an LLC Taxed as an S-Corp
If you’re starting an LLC and plan to apply for S-corp election, you’ll need to follow the rules for naming an LLC in your state. Some states have word use or decency restrictions, so you’ll need to check the applicable state statutes to make sure that your name meets all legal LLC naming requirements.
There are some general guidelines that apply across the board. These guidelines are taken from the Uniform Law Commission’s Uniform Limited Liability Company Act (ULLCA), some form of which has been adopted by 23 US states and territories.
General guidelines for naming your LLC (from Section 112 of the ULLCA):
- Must include an identifier such as LLC, L.L.C, or Limited Liability Company.
- Must be unique in your state. This means that your name can’t be the same, or even very similar to, the name of another business in your state.
- Must not include any prohibited or restricted words or phrases, including misleading terms (such as “bank” if your business is not a bank).
Naming a Corporation Taxed as an S-Corp
The rules for naming a corporation taxed as an S-corp are similar to those for naming a regular corporation or an LLC:
- Must include an identifier such as Inc, Corp, or Incorporated.
- Must be unique in your state. Your name can’t be the same, or even very similar to, the name of another business in your state.
- Must not include any prohibited or restricted words or phrases, including misleading terms (such as “professional” if your business is not a professional corporation).
What if I don’t want to include an identifier in my business name?
If you don’t want to include an identifier like “LLC” or “Inc” in your business name, you can register to do business under a DBA, or “doing business as” name. This will allow you to operate under a name that is not your legal business name. Typically, DBAs are registered at the state level, but some states register DBAs at the county or municipal level. Check with your state and local jurisdictions to find out how to register a DBA in your state.