Elect S Corporation status for your C Corporation or LLC.
In order to enjoy the best-possible tax savings for your business, you need to have the right tax classification. Many c corporations and LLCs elect to file for s corporation status because of the advantages this classification provides their businesses, including:
- Pass-through taxation (the company's tax obligation is passed along to shareholders)
- Once-a-year tax filing requirement (vs. quarterly for a C Corporation)
In order to elect an s corporation status, companies must file the IRS S Corp Form 2553, "Election By a Small Business Corporation." Timing is critical with Form 2553. The s corp election deadline dictates that it must be filed within 75 days of your c corporation or LLC's anniversary of formation, or within 75 days of a new year. If you have questions about a potentially late s corp election, please speak with a representative from incorporate.com who may be able to help you.
Companies often find it worthwhile to file Form 2553 for the thousands of dollars in potential tax savings an S Corporation status can provide their C Corporation or LLC.
Find out more about business tax classifications by visiting our Frequently Asked Questions section.
S Corporation Election FAQs
- What is an S Corporation?
- How does pass-through taxation work?
- What is Form 2553?
- When do I submit Form 2553 to the IRS?
- How can incorporate.com help me?
- Can an LLC be taxed as an S Corporation?
- Are there other IRS S Corp Tax Forms I should be aware of?
What is an S Corporation?
An S Corporation is a corporation that can take advantage of pass through taxation. Pass through taxation is when each shareholder reports their share of the company's profit or loss on their individual tax returns.
S Corporation shareholders must be U.S. citizens, the company must be a domestic corporation, must have only one class of stock, the shareholders must be individuals or their estates or certain tax-exempt entities or trusts (i.e., not another corporate entity) and the number of shareholders of an S-Corporation cannot exceed 100 (with family members eligible for treatment as a single shareholder). To qualify as an S-Corporation for federal tax purposes the company must make an S-Corporation election through Internal Revenue Service Form 2553.Back to Top
How does pass-through taxation work?
For the typical C-Corporation, the income of the corporation is taxed at the applicable corporate tax rate, and dividends distributed to shareholders are taxed as ordinary income; a situation often referred to as "double-taxation". With an S-Corporation, the income of the company flows through directly to the shareholders and is treated as a shareholder distribution, which is not generally subject to payroll taxes. It is important to note that shareholders employed by an S-Corporation must show regular income, which is taxed as wage income.Back to Top
What is Form 2553?
This s corp form is filed with the IRS to elect S Corporation status.Back to Top
When do I submit Form 2553 to the IRS?
This is one of the s corporation forms that is due within 75 days of the Date of Formation, within 75 days of a new tax year, or any time during the year preceding the year the election is to be effective.Back to Top
How can incorporate.com help me?
We can help you to complete the tax form. If you aren't 100% sure if the 2553 election is what you want, you have the opportunity to speak with an accountant who can provide you with helpful information so you can make the best decision for you.Back to Top
Can an LLC be taxed as an S Corporation?
This is an option. You may wish to elect to have your LLC taxed as an S-Corporation if your LLC is making regular distributions to members, particularly members who are not employed by the LLC. If you are interested, we can put you in touch with an accountant prior to filing a Form 2553, and the accountant can help you make the decision that is right for you. .Back to Top
Are there other IRS S Corp Tax Forms I should be aware of?
While IRS Form 2553 is required for the election of your business as an s corporation, there are a few other s corp-specific forms you should be aware of including the IRS s corp extension form. Also know as Form 7004, the IRS s corp extension form, gives a business entity a longer span of time to file their business income taxes, information, or additional returns. Another form to be aware of is Form 1120s, the Income Tax Return for an s corporation.Back to Top