Election by a Small Business Corporation (S-Corp Election)

Who Files Form 2553

Domestic corporations or LLCs that meet the S-Corp eligibility requirements: 100 or fewer shareholders, all of whom are US citizens or resident individuals (with limited exceptions for certain trusts and estates), one class of stock, and a permitted tax year.

What Form 2553 Reports

Form 2553 elects S-Corp federal tax treatment under Subchapter S. Once filed and accepted, the entity files Form 1120-S annually instead of Form 1120. Late S-elections may receive relief under Rev. Proc. 2013-30 if filed within 3 years and 75 days of the intended effective date with reasonable cause and consistent reporting.

Key Deadlines

• Within 2 months and 15 days of the start of the desired tax year (e.g., March 15 for calendar-year filers)
• Late election relief available within 3 years and 75 days under Rev. Proc. 2013-30

Common Mistakes

• Missing shareholder consent signatures (every shareholder at the time of election must sign)
• Filing without first obtaining an EIN for the entity
• Not realizing single-member LLCs must first elect to be taxed as a corporation (Form 8832) or rely on the simultaneous-election provision
• Missing late-election filing relief windows under Rev. Proc. 2013-30

Best Practices

• File Form 2553 within 2 months and 15 days of the start of the desired tax year (March 15 for calendar-year filers). Earlier is always safer.
• Make sure every shareholder signs the consent. Missing signatures invalidate the election entirely.
• Confirm the entity has an EIN before filing. The EIN is required on the form, and applying after the deadline can blow the timeline.
• For late elections, document reasonable cause and file under Rev. Proc. 2013-30 within 3 years and 75 days. Most late filings are accepted with reasonable cause.
• Set up payroll for the new S-Corp BEFORE the first reasonable-comp paycheck. Retroactive payroll without timely deposits triggers 941 / 940 penalties.

Source: Official Form 2553 information at IRS.gov