Form 2553 is the IRS form a corporation, or an LLC eligible to be taxed as a corporation, files to elect S corporation status. The IRS says it must be filed no more than 2 months and 15 days after the start of the tax year the election is to take effect, or at any time during the tax year before.
It's a short form with a long tail. Get the timing or the shareholder consents wrong and the election either starts a year late or doesn't happen at all, which is why it pays to understand the rules before you or your accountant sign it.
Can your business elect S corp status?
According to the IRS instructions, a business qualifies only if it meets every one of these tests:
- It's a domestic corporation, or a domestic entity eligible to elect to be treated as a corporation.
- It has no more than 100 shareholders.
- It has no nonresident alien shareholders.
- It has only one class of stock. Differences in voting rights don't count, so voting and non-voting shares are fine as long as every share has identical rights to distributions and liquidation proceeds.
- It isn't one of the ineligible corporations the instructions list.
- Every shareholder consents.
That third test is the one to check first if any co-owner isn't a US citizen or resident. A single nonresident alien shareholder rules the election out, whatever the size of their stake.
What about LLCs?
This is where Form 2553 saves paperwork. The IRS says an entity eligible to elect to be treated as a corporation that meets the tests will be treated as a corporation from the effective date of its S election, and doesn't need to file Form 8832, Entity Classification Election, as well. So a qualifying LLC files the one form. If you're still weighing up the structure itself, my guides to S corp versus LLC and the tax benefits of an LLC cover the decision that comes before this form.
The deadline, with the IRS's own example
| Situation | When to file Form 2553 |
|---|---|
| Existing calendar-year company wanting S status from next 1 January | Any time during the current tax year, or within 2 months and 15 days after 1 January |
| Brand new calendar-year corporation whose first tax year starts on 7 January | Between 7 January and 21 March, for S status from day one |
| Missed the window | The election generally applies from the following tax year, unless you qualify for late election relief |
The new-company example is from the IRS instructions themselves, and it shows why the clock starts when the tax year starts, not on 1 January for everyone. A company that begins its first tax year in November has a window running from that November date.
Every shareholder has to sign
The instructions require each shareholder's consent, given in column K of the form or on a separate consent statement or continuation sheet attached to it. In practice, one co-founder travelling or slow to sign can push you past the deadline. Get the signatures in the same week you decide to elect.
Missed the deadline? Late election relief
The IRS does offer a route back. A corporation can ask for relief if it can show reasonable cause for filing late and that it acted diligently to fix the mistake once it found it. The key conditions in the instructions:
- Form 2553 is filed within 3 years and 75 days of the effective date entered on line E.
- You explain the reasonable cause and what you did to correct it.
- You can provide statements from every shareholder during the gap period confirming they reported their income consistently with S corporation status for every affected year.
- If you don't meet the conditions, the corporation generally has to request a private letter ruling and pay a user fee.
If you're making a late election by attaching Form 2553 to Form 1120-S, the instructions say to write a specific statement in the top margin of the first page referring to the late election revenue procedure. That's a detail your accountant should handle.
How to file and what happens next
- Complete the form with your EIN, the effective date on line E and every shareholder's consent.
- Send the original election, not a photocopy, or fax it to the IRS service center listed in the instructions.
- If you fax it, keep the original Form 2553 with the company's permanent records.
- Wait for the IRS notice. The instructions say the service center will tell you whether the election is accepted and when it takes effect, and will also tell you if it isn't accepted.
Keep that acceptance notice somewhere safe with the company's records. It's your written proof that the election was accepted and of the date it took effect.
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My verdict
If you've decided S corp status is right for your business, file Form 2553 early in the tax year before it should apply, with every shareholder's signature collected first, and keep the IRS acceptance letter with your formation documents. Late election relief exists, but it's paperwork you never want to need. And if any shareholder might be a nonresident alien, check that test before anything else.
An S corporation with employees also files a quarterly return, covered in our guide to the quarterly payroll tax return.
Frequently asked questions
When is the Form 2553 deadline?
No more than 2 months and 15 days after the start of the tax year the election is to take effect, or at any time during the preceding tax year.
Does an LLC need Form 8832 as well as Form 2553?
No. The IRS says an eligible entity that meets the tests is treated as a corporation from the effective date of its S election and doesn't need to file Form 8832.
How many shareholders can an S corporation have?
No more than 100, with no nonresident alien shareholders and only one class of stock.
Do all shareholders have to sign Form 2553?
Yes. Each shareholder must consent, either on the form or on a separate consent statement attached to it.
What if I filed Form 2553 late?
The election generally takes effect the following tax year, but relief may be available if you show reasonable cause and file within 3 years and 75 days of the intended effective date.
How do I know my S corp election was accepted?
The IRS service center notifies the corporation whether the election is accepted and when it takes effect.
