S Corp Election: How To Elect S Corp Status (and When You Should)

If you’ve decided that becoming an S corp is right for your business, there are a few things you’ll need to do to make this election. By checking eligibility, understanding deadlines, and knowing which forms to file, you can ensure your company stays in compliance. We’ll help by walking you through the submission process and explaining what happens after you file your election form.

Before You File: Confirm Eligibility

The first step is understanding when to elect S corp status and when this status isn’t the right choice. While S corp status offers many benefits, the Internal Revenue Service (IRS) lists specific limitations on who can use it. To qualify, you must:

• Have 100 or fewer shareholders
• Use just one class of stock
• Have eligible shareholders, such as individuals, estates, and certain trusts
• Have no partnerships, corporations, or nonresident aliens as shareholders
• Be a domestic corporation or limited liability company (LLC)

While these are the basic eligibility rules, the federal government has specific requirements for trusts and other topics. For example, members of a family can be counted as one shareholder for the 100-shareholder limit. If your ownership or situation is unusual, you should always consult with a tax professional before filing Form 2553.

Form 2553 Filing Deadline

One of the most important steps in electing S corp status is filing Form 2553 by the deadline. You are required to file within 2 months and 15 days of the beginning of the tax year. Additionally, you can generally file the election at any time during the preceding tax year. For calendar-year filers, this normally means that you must file the form by March 15.

If the business is newly formed, the deadline is different. In this instance, the business must file within 2 months and 15 days of when it first had shareholders or owners, began doing business, or had assets. A company that first began doing business on May 15 would need to file by July 30.

What You Need Before You Start

To make this process as easy as possible, stay organized. You’ll need the following information before you elect S corp status.

• Legal name
• Employer Identification Number (EIN) 
• Incorporation or formation date
• Each shareholder’s name, address, ownership percentage, Social Security number or EIN, tax year end, and signature

If you do not have all of this information, you can apply for it or look it up. You can obtain your EIN by applying for one with the IRS. You can also use EntityCheck’s Instant EIN Search to look up an existing EIN. Meanwhile, the Secretary of State Business Search tool helps you find formation documents, business details, and the company’s standing in the state.

How To Complete Form 2553, Part by Part

Form 2553 has multiple parts, but many calendar-year filers must submit only Part I.

Part I: Election Information

This section focuses on key information about your business. Missing shareholder consent signatures are one of the most common reasons for rejection, so review your documents carefully before submitting. 

You’ll need to enter the organization’s legal name and address. Then enter the EIN, date and state of incorporation or formation, and the date you want your S corp election to take effect.

In Part I, you’ll also be able to designate your business’s tax year. Calendar-year businesses will generally check box F(1) to have a tax year that ends on December 31.

On the second page, shareholders must show their consent to electing S corp status. You’ll generally need to list each shareholder’s name, address, ownership shares or percentage, Social Security number or EIN, and the month and day when the shareholder’s tax year ends.

Part II: Selection of a Fiscal Year (Skip If Calendar Year)

You only need to do Part II if you checked box F(2) or F(4) during Part I. This section allows businesses to use tax years other than the calendar year. Box F(2) and F(4) specifically allow you to use a fiscal year or 52–53-week tax year based on a specified date. Requirements vary depending on the tax year you want to set up, so read the instructions carefully.

Part III: Qualified Subchapter S Trust (QSST) Election (Skip If Not Applicable)

This section applies only when an eligible trust shareholder makes a QSST election. As a result, most filers skip it. 

If a QSST meets IRS requirements, it can qualify as an eligible shareholder. To file for S corp status with a QSST, you’ll need to provide information about the trust and its income beneficiary. The trust’s income beneficiary or legal representative must sign the election form.

Part IV: Late Corporation Classification Election Representations (Only If Filing After the Deadline)

Part IV only applies to some late filers, so most businesses filing after the deadline won’t need it. If you meet Revenue Procedure 2013-30 conditions and want to request relief for a late corporate classification election along with a late S corporation election, you’ll use Part IV to confirm that you intended both elections on the same date.

You generally must file Part IV within 3 years and 75 days from the intended effective date. If you’re simply filing your S corp election late, Part IV likely doesn’t apply.

Where and How To Submit Form 2553

Unlike many formation documents and state returns, you can't e-file Form 2553. Instead, you must mail or fax it to the correct IRS service center in the entity’s state. You can find the address to mail or fax it to in the most recent IRS instructions for Form 2553.

If you mail the form, use registered or certified mail so you have proof of submission. Similarly, if you fax Form 2553 to the IRS, keep the original form and the fax confirmation.

What Happens After You File

Once you have filed your S corp election, the IRS will generally respond within 60 days. If your election is approved, you’ll receive a CP261 notice, which also tells you when your S corp status takes effect. Sometimes, the IRS won’t accept an S corp election. When this happens, they may send a CP264 notice explaining the decision. Depending on the reason, you may be able to correct and resubmit your election.

If you have not heard from the IRS within 60 days (or 5 months if you requested a fiscal tax year in Part II), call the IRS Business & Specialty Tax Line at 800-829-4933. They can send a replacement letter known as a 385C if the CP261 was lost in the mail. If they never received your application, you will likely need to submit it again. Because lost mail, misplaced documents, and similar issues can happen, always keep confirmation and proof that you filed your S corp election.

A Quick Word on the Entity Behind the Election

Before filing Form 2553, it’s a good idea to confirm that your business’s state registration information is accurate and that the entity remains in good standing. To make sure your company is ready for this step, use EntityCheck’s Secretary of State (SOS) Business Search to check your registration status and standing quickly.

Frequently Asked Questions

Can I file Form 2553 online?

Unlike tax returns and many other filings, you can't submit Form 2553 online. You can only submit it by mail or fax. You can check the latest IRS instructions for filing Form 2553 to find out where you should mail or fax your form. 

What happens if a shareholder forgets to sign Part I?

All shareholders whose consent is required under the Form 2553 rules must sign Part I. Unfortunately, missing signatures are a common mistake in S corp filings. If a required signature is missing, it can delay the IRS’s acceptance of the S corp election and may require additional steps to correct the missing consent. The IRS explicitly states that it does not consider an application timely filed if it is missing signatures. If you notice that a signature is missing, talk to a tax professional about how to correct the problem.

How do I know which IRS service center to send Form 2553 to?

The instructions for Form 2553 list where to send the form. The appropriate IRS service center varies by location. While locations can change, the IRS currently accepts these forms at its Kansas City and Ogden service centers. The filing instructions list the physical addresses and fax numbers for both locations.

Can I still get S corp treatment if I miss the deadline?

You may still get S corp treatment if you missed the deadline, but this isn’t guaranteed. Under Revenue Procedure 2013-30, a qualified business can request relief for filing a late election if it meets all applicable requirements. For example, they must have reasonable cause for filing late and be diligent about fixing the mistake once they discover it. Even if this rule applies, you must generally file the late election within three years and 75 days of the date you wanted it to take effect. 

How long does it take to hear back after filing Form 2553?

After you have filed Form 2553, you should generally hear back within 60 days with an approval or denial. If you requested a fiscal tax year, it can take about 90 days longer. If you haven't heard back within that timeline, contact the IRS Business & Specialty Tax Line at 800-829-4933 and ask for a replacement letter.

What should I do if I never receive my CP261 notice?

If you have never received your CP261 notice, call the IRS Business & Specialty Tax Line at 800-829-4933. You can check the status of your election and see if a replacement letter can be sent. Once you receive your CP261, store it with your company’s other important documents.