S-Corporation Tax Election

IRS Form 2553 - Small Business Tax Election

What is the Form 2553?

The 2553 Form, known as the sub chapter S election, is required to be filed with the IRS to get S-Corporation status for purposes of federal taxation. Filing this Form with the IRS is used to convert a C-Corporation into an S-Corporation. If you elect for us to form an s-corporation on your behalf we will prepare the form 2553 and deliver it to you with your filed Articles of Incorporation. The form will designate where each of the shareholders and or officers of the corporation are required to sign. An addendum page is included with the Form 2553 that will provide the FAX number of the appropriate IRS office where the Form 2553 will need to be delivered to in order to receive the small business tax election status from the IRS. Within a couple of weeks a confirmation should be received from the IRS confirming that the the 2553 has been received and that the S Corporation tax election has been granted.

What is the “S Corporation Deadline?”

In order to elect S-Corporation status for an already existing C-Corporation for the current tax year, the corporation must file the IRS Form 2553 by March 15. If the corporation is filed on or after January 1 of the current tax year, then the S-Corporation election can be submitted anytime within the tax year as long as the filing is accepted no later than 75 days after the corporation has started any of the following activities listed below (whichever is earliest):

  • Issued stock to shareholders
  • Acquired assets
  • Conducted business as a corporation

If the S-Corporation electing is filed more than 75 days after the above listed items then the S-Corporation status would still be elected, but it would not go into effect until the beginning of the next calendar year.


Who Will Typically Elect the S Corporation Status?

Typically entrepreneurs will select the S-Corporation as the entity of choice for the following reasons:

  • The S-Corporation combines the advantages of the sole proprietorship, the partnership, the LLC and the corporation into one entity.
  • Unlike sole proprietors and the partners in a partnership the shareholders of the S-Corporation are granted the same level of limited liability and personal asset protection as are the shareholders of a corporation.
  • The S-Corporation allows shareholders to avoid the “double taxation” levied on shareholders of C-Corporations that is because all of the income or losses in a S-Corporation are reported only once on the personal income tax returns of the S-Corporation’s shareholders