IRS Form 2553: How to Elect S-Corporation Status

This is the election that changes how a corporation or an eligible company is taxed, moving its results out to its owners rather than taxing them at the entity.

It is one form, it is short, and it is unusually unforgiving about timing and about who signs. It also is not a one-off test: the conditions have to keep being met afterwards, and an ownership change can end the status without anyone intending it.

This covers who is eligible, how the election is made and by when, what happens when it is filed late, how you confirm it was accepted, and how it is ended deliberately or otherwise.

IRS Form 2553 is the official election form a corporation or LLC uses to be treated as an S-corporation for federal income tax purposes. Making this election correctly, and on time, determines whether your business avoids double taxation. This guide covers every eligibility rule, the filing deadline, late-election relief, and what happens after the IRS accepts your election.

What Is Form 2553?

Form 2553, Election by a Small Business Corporation, notifies the IRS that your entity has chosen to be treated as an S-corporation under Subchapter S of the Internal Revenue Code. S-corp status means the corporation's income, losses, deductions, and credits pass through to shareholders and are reported on their individual returns, avoiding entity-level federal income tax.

Who Can File Form 2553?

Only an eligible small business corporation may make the S-election. The requirements are strict:

Entity Type

• Domestic corporation (incorporated in any US state or DC)
• A limited liability company (LLC) that first elects corporate tax treatment on Form 8832 and then elects S-corp status on Form 2553

Shareholder Limits

• No more than 100 shareholders
• All shareholders must be US citizens or permanent residents (no foreign shareholders)
• Shareholders must be individuals, estates, certain trusts (QSSTs, ESBTs, grantor trusts), or tax-exempt organizations
• No partnerships or C-corporations as shareholders

Stock Restrictions

• Only one class of stock is permitted (voting and non-voting shares of the same economic class are allowed)
• No preferred stock with liquidation preferences that differ from common stock

Pro Tip: If your LLC wants S-corp treatment, file Form 8832 and Form 2553 together, or attach a statement to Form 2553 that the LLC is requesting to be classified as a corporation in conjunction with the S-election.

Filing Deadline for Form 2553

The election must be filed no later than 2 months and 15 days after the beginning of the tax year for which the election is to take effect. For a calendar-year corporation, that is March 15 of the first year the election is intended to be effective.

How to Complete Form 2553

Part I, Election Information

• Enter the corporation's name, address, and EIN.
• Indicate the effective date of the election.
• Identify the tax year (calendar year or fiscal year). Fiscal year requires additional justification.
• List the name, address, SSN/EIN, and number of shares held by each shareholder.
• Each shareholder must sign the consent statement on Part I.

Part II, Fiscal Year

Complete Part II only if you are requesting a fiscal year other than December 31. Options include a natural business year or an ownership tax year. Most corporations use the calendar year and can skip this section.

Late S-Election Relief

If you missed the deadline, you may still obtain relief under Revenue Procedure 2013-30. You can file Form 2553 as a late election and include a statement explaining the reasonable cause for the delay. The IRS generally grants relief if:

• The corporation intended to be an S-corp from the intended effective date
• The corporation has filed all returns consistent with S-corp treatment (or files corrected returns)
• No more than 3 years and 75 days have elapsed since the intended effective date
• All shareholders who held stock on the intended effective date consent to the election

IRS Acknowledgment

After filing, the IRS will send a CP261 notice acknowledging the S-election, or a CP264 notice if the election is not accepted (with the reason). Keep this acknowledgment permanently in your corporate records. If you do not receive a notice within 60 days, follow up with the IRS Business & Specialty Tax Line.

Revoking the S-Election

A valid S-election continues until revoked or terminated. To voluntarily revoke, shareholders holding more than 50% of outstanding shares must consent in writing. Revocation is effective from January 1 of the year it is filed (if filed by March 15) or from January 1 of the following year (if filed after March 15). After termination, the corporation generally cannot re-elect S status for 5 years without IRS consent.

Common Mistakes

• Missing the 2-month-15-day deadline without claiming relief
• Failing to get shareholder consent signatures before filing
• Having an ineligible shareholder (e.g., a foreign person or another corporation)
• Issuing preferred stock that disqualifies the election
• Not attaching Form 8832 when converting an LLC

Frequently Asked Questions

Written by

Ankit Sarawagi, CPA, CA, MBA

Ankit leads the finance team at Profitjets, where he has worked with 500+ businesses across the US on bookkeeping, tax and CFO-level strategy. He writes about the habits that keep small business books accurate all year. Connect on LinkedIn