About Form 2553, Election by a Small Business Corporation Internal Revenue Service


Form 2553, Election by a Small Business Corporation, is an Internal Revenue Service form that can be filed by a business to elect to be registered as an S Corporation rather than a C Corporation. Effective June 18, 2019, the filing address has changed for Form 2553 filers located in certain states. For details, see Where to File Your Taxes for Form 2553. Order registered agent service and receive your new registered agent information immediately. Enabling tax and accounting professionals and businesses of all sizes drive productivity, navigate change, and deliver better outcomes.


IRS Form 2553, “Election By a Small Business Corporation,” is required to be filed with the IRS to switch a C Corporation to S Corporation status for purposes of federal taxation. To understand how much you could save in taxes by forming an S Corporation, check out our S Corporation Tax Calculator. One significant benefit of electing to become an S corporation is that an S corp’s net taxable income, in general, is taxed to the shareholders of the corporation, not the corporation itself. The income is shown on the shareholders’ personal returns and is taxed at their personal tax rates. When you first form your corporation, you have a short window of opportunity to make an S corporation election that is effective for the first year of operation. The election must be filed with the IRS no more than two months and 15 days after the beginning of your corporation’s tax year. An S-Corporation is a “pass through” tax entity, so it is not subject to double taxation like a C-Corporation.

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The Child S-What Is The Form 2553 For Your Business is treated as a division of the parent. In order to make this election, one must file IRS Form 8869. Now my question is, which is better, S-Corp or Qualified Joint Venture? My husband and I are forming an LLC, and thinking which of the 2 we should consider for tax purposes.

tax election

The IRS will assume that it’s a C corporation if you don’t take this step, and your business would then be obligated to pay a corporate income tax on its net taxable income for the year. Traditional C-corps pay corporate income tax on profits. If those profits are distributed to shareholders, each shareholder pays personal income tax on the amount they receive. A small business that wants to avoid this “double taxation” of company profits can consider filing Form 2553 and electing to be taxed as an S-corp instead.

Who Needs to File Form 2553?

In New York City, S corporations are subject to the full corporate income tax at an 8.85% rate. However, if the S corporation can demonstrate that a portion of its business was done outside the city, that portion will not be subject to the additional tax. Congress has directed the IRS to show leniency with regard to late S elections. Accordingly, often, the IRS will accept a late S election. Section F of Form 2553 allows you to select the type of tax year your S-Corp will use.

So, even if you are an established business, you have the ability to change your structure to best suit your financial and tax goals. For all, your business classification directly affects the amount of tax your business and you, the owner, pays. Before the advent of the S Corporation in 1958, entrepreneurs had two options for forming a business entity. They could form a partnership or form a C Corporation. But neither of those business structures fulfilled the needs of many people seeking to start their own…

Can I Convert My LLC to an S-Corp When Filing My Tax Return?

But in this case, the effect of the election would take place at the beginning of the next of the next calendar year. If it does, make sure you provide an explanation as to why you’re filing late, either in the first line of Part I or in a separate letter that you attach to the form. Fortunately, for most businesses, several of the sections straight up don’t apply. So, chances are you’ll be able to skip a good portion of the 4-page form.

Can I put my LLC Under an S Corp?

An S corp can own an LLC. Limited liability companies (LLCs) have owners (members) that can be individuals or other business entities. An S corporation (S corp) is a business entity; therefore, it can be a member, or owner, of an LLC.

This part also asks about contingency plans in the event that your https://intuit-payroll.org/ year is denied by the IRS. Harbor Compliance does not provide tax, financial, or legal advice. Use of our services does not create an attorney-client relationship. Harbor Compliance is not acting as your attorney and does not review information you provide to us for legal accuracy or sufficiency. Access to our website is subject to our Terms of Use and Service Agreement.

An S corporation is only taxed once, whereas a C corporation can be subject to double taxation under certain circumstances. That means a C corp can be taxed both at the corporate level and the shareholder level, if it pays out dividends.

  • Lawyers on UpCounsel come from law schools such as Harvard Law and Yale, and average 14 years of legal experience, including work with, or on behalf of companies like Google, Menlo Ventures, and Airbnb.
  • Before you file a late Form 2553, make sure you check with the IRS to ensure you qualify for late election relief.
  • Click here to find out more about what you’ll need to submit to file Form 2553 late at the IRS website by clicking here.
  • When deciding whether your LLC should be taxed as an LLC or an S-corp, consider whether the potential tax savings of S-corp status will outweigh the additional expense and complexity.
  • Stock cannot be issued to non-resident aliens, trusts , partnerships, and corporations.

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