By submitting Form 2553 to the Internal Revenue Service, you may convert your limited liability business (LLC) to a S corporation (S corp) (IRS).

To discover how and why to pick the S corp tax type for your LLC, see our Convert LLC to S Corp tutorial below.

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LLCs and corporations utilise Form 2553 to elect the S corp tax classification with the IRS.

An LLC does not have to become a corporation before obtaining the S corp tax status.

To complete Form 2553 and elect S corp status for your LLC, follow these three steps:

To qualify for S corporation classification, the following claims must be true:

You must submit Form 2553:

Section I is reserved for late filers. Review the “General” section of the IRS instructions to Form 2553 for information on late-filer relief.

Part I of Form 2553 contains your company’s name and address, incorporation date, and tax year.

Section G is optional for applicants who do not have more than 100 shareholders.

View the guidelines for assistance in selecting a tax year in section F.

Section I is reserved for late filers. Review the “general” portion of the IRS instructions to Form 2553 for information on late-filer relief.

The last portion must contain all shareholders’ names and addresses, as well as their signatures agreeing to the S corp election.

Part II might be difficult to accomplish. If you have any questions or concerns, we recommend examining the “particular instructions” portion of the IRS instructions to Form 2553 and talking with an accountant.

The state in which your main company, office, or agency is situated determines where to submit form 2553.

Set 1 of the states:

Connecticut, Delaware, Georgia, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, Washington, D.C., West Virginia, and Wisconsin are among the states represented.

Fax Number (855) 887-7734 for Form 2553

Set 2 of the states:

Alabama, Alaska, Arizona, Arkansas, California, Colorado, Florida, Hawaii, Idaho, Iowa, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Washington, and Wyoming are among the states that have a state of the union.

Department of the Treasury Internal Revenue Service Ogden, UT 84201 Form 2553 Mailing Address

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Fax Number (855) 214-7520 for Form 2553

An LLC does not have to become a corporation before obtaining the S corp tax status.

There is just one reason to incorporate before adopting S corp taxes for your LLC.

If you carry over a considerable amount of earnings from year to year, it makes more sense to form a company taxed as a S corporation rather than an LLC taxed as a S corporation.

Step 1: If permitted by the state, convert an LLC to a corporation. For further information, contact your state’s business section.

Step 2: Complete all corporate requirements. To discover more about corporation bylaws, meeting minutes, the incorporators statement, and other topics, visit our How to Start a Corporation page and pick your state.

Step 3: Submit IRS Form 8832 to convert your business organisation (as reported to the IRS) from an LLC to a corporation. This form may be submitted with a future date within 12 months or backdated 75 days.

Step 4: As described above, file IRS Form 2553 to opt S corp for your newly created company.

It is predicted that if a company can pay its owners “fair wages” and at least $10,000 in dividends every tax year, then a multi-member LLC should choose the S corp classification.

NOTE: Most small firms do not produce enough profit in the early stages to justify electing S corp status.

Select S Corp Status if:

Select Default Tax Status if:

Most small company owners spend their profits to develop their companies and earn enough profit to cover the increased expenses of operating as a S corporation (or to pay a reasonable salary in addition to enough of a distribution to lead to actual tax savings).

The LLC’s earnings after costs is taxed on the owner(s) personal tax return under a default tax structure. The sum is then subject to self-employment taxation by the owner.

If the LLC has more than one member, each owner is taxed on their portion of the earnings on their personal tax return.

You must pay yourself a fair income if you are a “active shareholder” under S corp classification, that is, if you have an active involvement in corporate activities.

To make the S company financially viable, you must also pay yourself at least $10,000 in dividends.

By avoiding paying FICA taxes on dividends, S corp owners may save around 16% on self-employment taxes under the correct conditions.

On their salaries, business owners pay both FICA and income taxes, but any distributions (or draws) are only subject to income taxes.

An LLC does not have to become a corporation before obtaining the S corp tax status.

In fact, we advise against creating a business and electing to be taxed as a S corporation. This is due to the S corp negating all of the advantages of a corporation.

Our S corp calculator will help you determine if the S corp tax structure is ideal for your small company.

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