How to elect S corp status with Form 2553

An S corp is not a kind of company you form at the state. It is a federal tax status that a corporation, or an LLC, asks the IRS for by filing Form 2553. Until the IRS accepts it, a corporation is taxed as a C corp and a single-member LLC is taxed as a sole proprietorship.

Who can elect

The Form 2553 instructions set the eligibility rules. In short, the company must be a domestic corporation or an LLC that is eligible to be taxed as one, with no more than 100 shareholders, only allowed shareholders (individuals, certain trusts and estates, and some exempt organizations, but no partnerships, corporations or nonresident aliens), and one class of stock.

An LLC that files Form 2553 does not also need Form 8832. The instructions say the LLC is treated as a corporation from the date the S election takes effect.

Who signs

Two kinds of signature go on the form.

• An officer signs the election itself: the president, vice president, treasurer, or another officer allowed to sign. For an LLC, a member or manager with that authority signs.
• Shareholders consent. Every shareholder who owns stock on the day the election is made must sign the consent column. If the election is made partway into the year it covers, anyone who owned stock earlier in that year and has since sold must consent too.

A spouse with a community property interest in the shares also has to consent. Missing consents are one of the common reasons elections get rejected.

The deadline

Form 2553 must be filed:

• no more than 2 months and 15 days after the beginning of the tax year the election is meant to take effect, or
• at any time during the tax year before that.

For a calendar-year company that wants S status for all of 2027, the window runs through March 15, 2027. A new company's first tax year starts on the earliest of the day it has shareholders, acquires assets or begins doing business, so a new company formed on June 1, 2026 has until about mid-August 2026.

File late, with no relief, and the instructions say the election generally takes effect the following tax year instead.

Filing and confirmation

The instructions list two ways to file: by mail or by fax, to the IRS service center listed for your state.

The instructions say to expect a decision within 60 days. When the IRS accepts, it sends a CP261 notice that says "We've accepted your S Corporation election per Form 2553." Keep that letter with the company's records. Banks, lenders and accountants ask for it.

Late election relief

Missing the deadline is common, and the IRS has a simplified fix under Rev. Proc. 2013-30. The Form 2553 instructions summarize it. Relief is generally available when:

• the company meant to be an S corp from the date it chose,
• it files within 3 years and 75 days of that intended effective date,
• the only reason it failed to qualify was the late filing, and
• it has reasonable cause for filing late.

To use it, write "FILED PURSUANT TO REV. PROC. 2013-30" at the top of page 1 and explain the reasonable cause in the statement the form asks for. A company outside the 3 years and 75 days, or with other problems, usually has to ask the IRS for a private letter ruling instead.

States that need their own election

Most states with an income tax follow the federal election automatically. A few do not.

New York City is a further case. The NYC Department of Finance says S corporations are exempt from the Business Corporation Tax but "are still subject to the General Corporation Tax." A New York City S corp pays corporate tax to the city even with both elections in place.

Arkansas is listed because older guides still tell owners to file Form AR1103. That form is no longer needed.

Before you file

Electing too early costs money. An S corp has to run payroll, file Form 1120-S and pay for both, whether or not the profit is big enough for the payroll tax saving to cover it. Run your numbers in the calculator first, with your state, and look at the S corp line next to the LLC line.