As a small business owner your tax classification can be changed. If you want your business taxed as an S corporation you will file Internal Revenue Service Form 2553.
You can request this election if you are a C corporation, a single-member limited liability company or a multi-member limited liability company.
Before the Form 2553 instructions this guide answers the most common questions owners ask about eligibility timing and what happens after you file.
Why would I want to change my tax classification?
When you form an entity such as an LLC or a C corporation the IRS assigns a default tax classification that comes with specific rules.
If that default does not align with your goals you can request different treatment. Your tax classification affects how much tax the business pays and how much you pay personally. For many small businesses an S corporation election can reduce total taxes.
Default tax classifications at a glance:
Business entity | Default tax classification |
|---|---|
Single-member LLC | Sole proprietorship |
Multi-member LLC | Partnership |
C corp | Corporation |
S corporation is not a default option. To be taxed as an S corporation you must file IRS Form 2553.
How are S corps and C corps taxed differently?
The core difference is pass-through treatment. An S corporation is a pass through entity while a C corporation is not.
For an S corporation profits flow to the owners and are reported on personal returns. For a C corporation the company pays corporate income tax and owners may also pay tax on dividends which creates double taxation when profits are distributed.
If a C corporation owner does not receive a dividend there is no tax at the shareholder level for that profit.
S corporation owners pay tax on their share of company profit whether or not it is distributed. Owners of S corporations may also qualify for the 20% pass through deduction while C corporation owners do not.
Comparison summary:
Feature | S corporation | C corporation |
|---|---|---|
Entity-level tax | No federal corporate income tax | Yes, corporate income tax |
Owner-level tax on profits | Yes, report on personal return | Yes, when dividends are paid |
Double taxation risk | Low | High when dividends are issued |
Pass through deduction eligibility | Yes, potential 20% | No |
What types of businesses are eligible to file IRS Form 2553?
Corporations single member LLCs and multi member LLCs may file Form 2553 to elect S corporation taxation if they meet all requirements.
Key eligibility rules:
Be a domestic corporation or eligible domestic entity
Have no more than 100 shareholders
Meet ownership rules shareholders must be individuals certain estates or exempt organizations
Meet residency rules shareholders must be US citizens permanent residents or resident aliens
Adopt a permitted tax year usually a calendar year or another eligible tax year
S corporations can use non-calendar tax years if they qualify under the natural tax year, ownership tax year or business purpose tax year tests. See Part II below for details.
What types of businesses don’t need Form 2553?
Situation | Form |
|---|---|
An LLC asking to be taxed as a C corp | Form 8832 |
A partnership requesting to be taxed as a C corp | Form 8832 |
A partnership or LLC taxed as a C corp requesting to go back to its default tax classification | Form 8832 |
A sole proprietor | Form an LLC first, then consider Form 2553 |
What is the deadline for filing Form 2553?
For a newly formed business
File within two months and 15 days of the entity formation date. If you miss this window you can still file but the default classification applies for the current year and the S election starts the next tax year.
Here’s an example: If you form a single member LLC on January 1, 2027 you have until March 15, 2027 to file for the current year. File by that date to have S corporation status for all of 2027. File later and you will be taxed as a sole proprietorship for 2027 and as an S corporation beginning in 2028.
For an existing business
File within two months and 15 days of the first day of the tax year you want S corporation status to begin. For example to start in 2027 file by March 15 2027.
What is the difference between Form 8832 and Form 2553
Use the correct form based on your goal.
Situation | Form |
|---|---|
If you want your LLC or partnership to be taxed as a C corp | Form 8832 |
If you’re already taxed as a C corp and want to go back to your default tax classification | Form 8832 |
If you want your corporation, LLC, or multi-member LLC to be taxed as an S corp | Form 2553 |
A sole proprietor | Form an LLC first, then evaluate Form 2553 |
If you’re filing Form 2553, you don’t need to complete Form 8832.
What happens after you submit Form 2553
The IRS typically sends a response within 60 days.
If approved you receive a CP261 Notice. Keep copies for your records.
If denied you receive a CP264 Notice. You will need to speak with the IRS about the reason and whether to refile.
Step by Step Form 2553 instructions
Confirm your eligibility before you begin. When in doubt consult a small business attorney or a CPA.
Part I. Election Information
Business information
Enter the legal name and mailing address of the corporation or entity. If the business address is your personal address you may use C slash O and your name.
Line A – Employer identification number
Enter your EIN. If you applied but have not received it, write Applied for with the application date.
Line B – Date incorporated
Enter the incorporation or registration date from state records.
Line C – State of incorporation
Enter the state where you formed the entity. For example some owners register in Delaware but operate elsewhere.
Line D – Name or address changes
Check the appropriate box if the business name or address changed after the EIN application.
Line E – Election effective date
Enter the date you want S corporation status to begin. For a first year entity use the earliest of the date the business first had owners first had assets or first began operations. If you missed the initial deadline enter the first day of the next tax year.
Line F – Selected tax year
Most businesses choose a calendar year. If you select box 2 or box 4 you must complete Part II.
Line G – Family as one shareholder
Check if you have more than 100 shareholders and need to count certain family members as a single shareholder. Otherwise leave blank.
Line H – Authorized representative
Provide the contact person the IRS should call about the form and include the title.
Line I – Explanation of late filing
You may request late election relief if you have a reasonable cause. Explain why the filing is late and what actions you took once you discovered the issue. This must be requested within three years and 75 days of the date on line E.
Shareholder consent page
List all shareholders who must consent to the election.
Line J: Names and addresses of shareholders
Line K: Shareholder signature and date
Line L: Stock owned number of shares or percentage and date acquired
Line M: Social Security number or EIN for estates trusts or exempt organizations
Line N: Shareholder tax year end usually December 31
Part II. Selection of Fiscal Year
Complete Part II only if you checked box 2 or box 4 on line F.
Line O – Choose one
New corporation adopting the tax year on line F
Existing corporation retaining the tax year on line F
Existing corporation changing to the tax year on line F
Line P – Indicate the test used
Natural tax year: Seasonal businesses may adopt a natural business year. Attach statements showing 47 months of gross receipts. Examples include summer vacation rentals, ski resorts and retailers with peak activity in December and January.
Ownership tax year: Shareholders holding more than 50% of the stock must have the same tax year or be changing to the same tax year.
If neither test applies complete Q or R.
Line Q – Business purpose tax year
Request a tax year based on business purpose and attach a statement that explains why
Indicate if you will make a section 444 election for the tax year on line F
Agree to adopt a calendar year if both business purpose and backup year are denied
Line R – Backup fiscal year selection
If planning a section 444 election complete Form 8716 and file it separately or attach it
Agree to adopt a calendar year if the section 444 election is denied
Part III. Qualified Subchapter S Trust (QSST)
A Qualified Subchapter S Trust is a trust that owns S corporation shares and pays all income to the income beneficiary. Most small businesses do not use this part. If you think it applies, consult an accountant.
Part IV. Late Corporate Classification Election
Skip if you filed on time. If filing late, review the representations carefully before signing to request relief.
Submission
Mail or fax Form 2553 to the correct IRS center for your state. See the IRS site for current addresses.
FAQs
Can a single member LLC file Form 2553?
Yes, a single member LLC can elect S corporation taxation if all eligibility rules are met.
What if I miss the deadline?
You can request late relief with a reasonable cause explanation in Part I line I.
Do I need Form 8832 with Form 2553?
No. If you are electing S corporation status use Form 2553 only.
Can I choose a non calendar tax year?
Yes. If you qualify under the natural ownership or business purpose tests and complete Part II.
How long until I hear back?
Most responses arrive within about 60 days by mail in the form of CP261 or CP264.
