How to Register an LLC as an S Corp: Form 2553, Deadlines, and Effects

To register your LLC as an S corp, file IRS Form 2553 (Election by a Small Business Corporation) signed by every member, and file it no later than two months and 15 days into the tax year you want the election to start. The filing changes only how the IRS taxes the business. Your LLC keeps its state-level legal structure and liability protections. One form does the whole job: an eligible LLC does not need to file Form 8832 first, because the IRS treats it as a corporation as of the effective date of the S election.¹

Confirm Your LLC Is Eligible

The IRS will reject the election if the LLC fails any of the structural tests in the tax code, and those tests apply for as long as the election is in effect.²

The LLC must be a domestic entity, organized in the United States.
It can have no more than 100 members. Certain family members (spouses, descendants, ancestors, and their estates) count as one member for this limit.
Every member must be a U.S. citizen, a U.S. resident, or one of a few specific types of trusts or estates. Nonresident aliens cannot hold any ownership interest.
The LLC can have only one class of ownership. All members must have identical rights to distributions and liquidation proceeds, though voting rights can differ. Preferred returns, tiered equity, or priority distributions disqualify the LLC.

Certain financial institutions, insurance companies, and domestic international sales corporations are ineligible regardless of the other rules.

Know the Filing Deadline

Timing is where most owners get caught. For the election to take effect in the current tax year, file Form 2553 either during the preceding tax year, or during the current year no later than two months and 15 days after it begins.³ For a calendar-year LLC, the deadline is March 15.

For a brand-new LLC, the clock starts on the effective date entered on the form, which is the earliest of the date the business first had members, first held assets, or first began operating.⁴

Miss the deadline and the election automatically rolls to the next tax year. The IRS can grant retroactive relief under Revenue Procedure 2013-30 if all of these are true:

The LLC intended to be an S corporation as of the requested effective date.
The request is filed within three years and 75 days of the intended effective date. This limit may not apply where the only defect was a late Form 2553 and everyone reported income consistently with S corp status.
The failure to become an S corporation was solely because Form 2553 was not filed on time.
All members reported their income on personal returns as if the S election had been in effect for every affected year.⁵

To use this relief, write “Filed pursuant to Revenue Procedure 2013-30” across the top of Form 2553 and attach an explanation of the delay along with statements from all members confirming consistent reporting.

What Form 2553 Asks For

Gather this information before you start. It has to match your existing federal records exactly, or the IRS may reject the filing.¹

The LLC’s legal name exactly as it appears on the articles of organization.
The Employer Identification Number. If the EIN hasn’t arrived yet, you can write “Applied For” with the application date, but having it in hand is preferable.
The requested effective date of the election.
The tax year the LLC will use. Most small businesses choose the calendar year ending December 31.
Each member’s ownership percentage and the date it was acquired.

Every member must sign the form to consent to the election, providing a Social Security number or ITIN. Signatures are made under penalties of perjury.³

How to Submit the Form

Form 2553 can go to the IRS by mail, fax, or as a PDF attached to a timely e-filed first S corporation return.⁶ If you mail it, use the IRS service center for the region where your principal office is located, and send it certified with a return receipt so you have proof of the mailing date.⁴ If you fax, keep the transmission confirmation.

What Happens After You File

Expect a response within about 60 days.⁴ If the election is approved, the IRS sends Notice CP261, a letter confirming acceptance and the effective date.⁷ Keep it permanently. You’ll need it for future filings and any audit.

Silence is not approval. If you haven’t heard anything within two months, or five months if you checked box Q1 requesting late relief, call the IRS at 1-800-829-4933 to follow up. The form may have been lost or flagged for more information.⁴ While the election is pending, file Form 1120-S if the election was submitted on time. Filing that first 1120-S finalizes the status change in IRS records.⁶

What Changes for the Business Once You’re an S Corp

The election creates recurring obligations the LLC didn’t have under its default tax classification.

Reasonable Salary for Owner-Employees

The IRS requires every S corporation to pay its owner-employees a reasonable salary before taking any distributions. The salary must reflect what someone with your training, experience, and responsibilities would earn doing similar work at a comparable business. Factors the IRS weighs include the time and effort you devote to the business, your duties, what non-owner employees are paid, and comparable pay at similar businesses.⁸

Setting the salary too low to inflate distributions is a known audit trigger. The IRS can reclassify distributions as wages and assess back payroll taxes, penalties, and interest. Notice CP261 warns new S corporations that the agency “may re-characterize distributions paid to a shareholder as salary if the distribution was paid in lieu of reasonable compensation.”⁷

New Filings

Form 1120-S: an annual information return reporting the business’s income, deductions, and credits. For calendar-year filers, it is due March 15, with a six-month extension available to September 15.⁶
Schedule K-1: one for each member, showing their share of income, deductions, and credits, used on their personal returns.
Payroll: because owner-employees receive a salary, the S corporation must run payroll and handle income tax withholding, Social Security, Medicare, and federal unemployment tax.⁹
Estimated tax payments: members who expect to owe $1,000 or more after withholding generally make quarterly payments using Form 1040-ES, due April 15, June 15, September 15, and January 15 of the following year.¹⁰

The financial reason most LLCs make the election is self-employment tax. Without the election, all net income is subject to the 15.3% Social Security and Medicare tax. After the election, only wages paid to owner-employees are subject to those payroll taxes. Distributions on top of a reasonable salary are still subject to income tax but not to the 15.3%.

How the Election Ends

Voluntary Revocation

To revoke the S election effective on the first day of the tax year, file the revocation by the 15th day of the third month, which is March 15 for a calendar-year LLC. To use a different effective date, the IRS must receive the revocation by that date. Members holding more than half of the ownership interests must consent.¹¹

Involuntary Termination

The election terminates automatically if the LLC violates any eligibility requirement, such as admitting a nonresident alien member, exceeding 100 members, or creating a second class of ownership interest. Termination takes effect on the day the disqualifying event occurs, not at year-end. If the violation was inadvertent, the IRS can grant relief through a private letter ruling request, with consent from all members during the affected period.¹²

State-Level Filings May Still Apply

The S corporation election is a federal tax classification, and states do not all follow it. Louisiana, New Hampshire, Tennessee, and Texas do not recognize the federal S election and tax S corporations more like C corporations at the state level, so the federal election does not eliminate a state corporate income or franchise tax there. Even in states that recognize the election, some require a separate state-level filing to confirm S corporation status, and many charge annual franchise taxes or report fees. Check your state’s department of revenue before assuming the federal election carries over.

1
Internal Revenue Service. Instructions for Form 2553
2
Office of the Law Revision Counsel. 26 USC 1361 – S Corporation Defined
3
Office of the Law Revision Counsel. 26 USC 1362 – Election, Revocation, Termination
4
Internal Revenue Service. Instructions for Form 2553 (12/2020)
5
Internal Revenue Service. Revenue Procedure 2013-30
6
Internal Revenue Service. Filing Requirements for Filing Status Change
7
Internal Revenue Service. Notice CP261 – S Corporation Election Acceptance
8
Internal Revenue Service. S Corporation Compensation and Medical Insurance Issues
9
Internal Revenue Service. S Corporations
10
Internal Revenue Service. Estimated Taxes
11
Internal Revenue Service. Revoking a Subchapter S Election
12
eCFR. 26 CFR 1.1362-4 – Inadvertent Terminations and Inadvertently Invalid Elections