File your Federal S-Corporation Election

Also known as an S-Corp, an S-Corporation is a business that has both incorporated and then additionally registered for S-Corporation status.

The typical for-profit Corporation (also known as a C-Corp) pays federal corporate income tax, and then its owners (shareholders) also pay federal income taxes on the income they receive from the Corporation. This is known as double taxation.

But S-Corporations avoid double taxation and instead receive pass-through taxation from the IRS. This means that S-Corporations pay no federal income taxes. Instead, all business income is recognized as the personal income of the owners.

The S in S-Corporation stands for "small business". This comes from the requirement that an S-Corporation have no more than 100 owners.

The typical for-profit Corporation (also known as a C-Corp) pays federal corporate income tax, and then its owners (shareholders) also pay federal income taxes on the income they receive from the Corporation. This is known as double taxation.

S-Corporations enjoy the benefits of Corporations, but with the double taxation. S-Corporations receive pass-through taxation from the IRS, meaning that they pay no federal income taxes. Instead, all business income is recognized as the personal income of the owners.

For comparison, LLCs, General Partnerships, and Sole Proprietorships also receive federal pass-through taxation.

Double taxation refers to the process by which a typical for-profit Corporation pays federal corporate income tax, and then its owners also pay federal income tax on the income they take from the Corporation.

Pass-through taxation refers to the taxation of business entities like S-Corporations, LLCs, General Partnerships, and Sole Proprietorships, whereby the business pays no income tax. Instead all income passes through the business to the owners, and the owners pay taxes on it.

Securing pass-through taxation from the IRS requires only one simple S-Corporation election filing you can conduct right here.

How to get pass-through taxation at the state level depends on the laws of your state. Some states grant your business pass-through taxation if you simply register the federal S-Corporation election. Some states require an additional filing directly with them to classify your business as an S-Corporation. Other states do not recognize S-Corporation status at all. You are responsible for researching and fulfilling your own state's requirements if you desire pass-through taxation at the state level.

Generally, you must have already incorporated and obtained a Federal Tax ID. Both of these filings are also services provided by SimpleFilings if you request them. After that, you are responsible for ensuring that you meet the following S-Corporation requirements before you file for the election:

(From the instructions for IRS Form 2553, Who May Elect section, revised December 2007)

A corporation or other entity eligible to elect to be treated as a corporation may elect to be an S corporation only if it meets all the following tests.

• • It is (a) a domestic corporation, or (b) a domestic entity eligible to elect to be treated as a corporation, that timely files Form 2553 and meets all the other tests listed below. If Form 2553 is not timely filed, see Relief for Late Elections on page 2.

• • It has no more than 100 shareholders. You can treat a husband and wife (and their estates) as one shareholder for this test. You can also treat all members of a family (as defined in section 1361(c)(1)(B)) and their estates as one shareholder for this test. For additional situations in which certain entities will be treated as members of a family, see Notice 2005-91, 2005-51 I.R.B. 1164. All others are treated as separate shareholders. For details, see section 1361(c)(1).

• • Its only shareholders are individuals, estates, exempt organizations described in section 401(a) or 501(c)(3), or certain trusts described in section 1361(c)(2)(A).

  For information about the section 1361(d)(2) election to be a qualified subchapter S trust (QSST), see the instructions for Part III. For information about the section 1361(e)(3) election to be an electing small business trust (ESBT), see Regulations section 1.1361-1(m). For guidance on how to convert a QSST to an ESBT, see Regulations section 1.1361-1(j)(12). If these elections were not timely made, see Rev. Proc. 2003-43, 2003-23 I.R.B. 998.

• • It has no nonresident alien shareholders.

• • It has only one class of stock (disregarding differences in voting rights). Generally, a corporation is treated as having only one class of stock if all outstanding shares of the corporation's stock confer identical rights to distribution and liquidation proceeds. See Regulations section 1.1361-1(l) for details.

• • It is not one of the following ineligible corporations.
  a. A bank or thrift institution that uses the reserve method of accounting for bad debts under section 585.
  b. An insurance company subject to tax under subchapter L of the Code.
  c. A corporation that has elected to be treated as a possessions corporation under section 936.
  d. A domestic international sales corporation (DISC) or former DISC.

• • It has or will adopt or change to one of the following tax years.
  a. A tax year ending December 31.
  b. A natural business year.
  c. An ownership tax year.
  d. A tax year elected under section 444.
  e. A 52-53-week tax year ending with reference to a year listed above.
  f. Any other tax year (including a 52-53-week tax year) for which the corporation establishes a business purpose.

  For details on making a section 444 election or requesting a natural business, ownership, or other business purpose tax year, see the instructions for Part II.

• • Each shareholder consents as explained in the instructions for column K.

See section 1361, 1362, and 1378, and their related regulations for additional information on the above tests.

A parent S corporation can elect to treat an eligible wholly-owned subsidiary as a qualified subchapter S subsidiary. If the election is made, the subsidiary's assets, liabilities, and items of income, deduction, and credit generally are treated as those of the parent. For details, see Form 8869, Qualified Subchapter S Subsidiary Election.

Yes, for taxation reasons too complicated to explain here, an LLC may sometimes decide that it desires to be treated by the IRS as an S-Corporation. To do so, it can simply complete the application here in the same manner as a standard Corporation filing to become an S-Corporation.

The highest-ranking officer of the business and all business owners must sign the application, in effect all unanimously "voting" for it. So they are all "electing" or "choosing" S-Corporation status.

There are no name requirements unique to S-Corporations. Rather, if the entity applying is a Corporation, the standard corporate name requirements apply. For example, it must contain an appropriate corporate indicator such as Inc., Incorporated, Corporation, etc.

For LLCs electing S-Corporation taxation, the standard LLC name requirements apply. For example, it must contain an appropriate LLC indicator such as LLC, Limited, Limited Liability Company, etc.

First, complete our simple one-page online application. Then provide payment for our sservice on the secure checkout page. We immediately prepare your IRS Form 2553 documents and display them on the next page to be signed by your business's highest ranking officers and all its owners. All signatures can be provide online immediately. If all required signators are not present, they can visit our Existing Customers page at any time to provide their signatures. Upon receipt of the final required signature, we fax your signed forms to the IRS, usually within one business day. We then send you an e-mail confirming that we have done so and that concludes our service on the order.

Then within 60 days, the IRS will send you a postal mail informing you of the acceptance or non-acceptance of your election and when it will take effect.

If it has been more than 60 days since your election was submitted and you still have not received an IRS notice of acceptance or non-acceptance, you can follow up with the IRS by calling 800-829-4933.

Also, take care not to file an S-Corporation tax return (IRS Form 1120S) prior to receiving the IRS notice, since it will contain whether it has been accepted or not, and when it will take affect if accepted.

Yes. An Incorporation or LLC Formation must be completed with the state prior to the filing of a S-Corporation election with the IRS. These are all filings that SimpleFilings can provide upon request.

Yes. The federal S-Corporation election application requires a Federal Tax ID, also known as an Employer Identification Number. The Federal Tax ID must be specifically for the Corporation or LLC that is applying for S-Corporation status. If you do not already have Federal Tax ID, SimpleFilings can assist you in filing for one upon request.

After providing all required signatures, which you can do easily online, we will submit your election to the IRS often within one same business day, and send you an e-mail confirming that we have done so. Then within 60 days, the IRS will send you a postal mail informing you of the acceptance or non-acceptance of your election and when it will take effect.

If it has been more than 60 days since your election was submitted and you still have not received an IRS notice of acceptance or non-acceptance, you can follow up with the IRS by calling 800-829-4933.

Also, take care not to file an S-Corporation tax return (IRS Form 1120S) prior to receiving the IRS notice, since it will contain whether it has been accepted or not, and when it will take affect if accepted.

No, it is the same turnaround time for everyone. We are usually able to submit your election to the IRS within one business day of receiving all required signatures, and the IRS should mail you a notice of acceptance or non-acceptance within 60 days of that.

Once an S-Corporation election is accepted by the IRS, it stays in effect until it is terminated or revoked.

We are experienced at the document preparation and filing process for electing federal S-Corporation status. We turn what can be an otherwise complicated and confusing filing into a smooth and simple experience. During the process you can view your order status online or utilize e-mail or phone support to be updated as often as you like for no extra charge. And ultimately, we get you back to focusing on your core business quicker.

Please visit our Fee Calculator to view the flat fee for our document preparation and filing service for the federal S-Corporation election.

SimpleFilings makes it easy to file your federal S-Corporation election. Simply submit the application to get started.

To check the status of your order 24 hours a day, simply enter your transaction ID on the Existing Customers page of this site. Your transaction ID can be found on your receipt e-mail. If you cannot locate your receipt e-mail or transaction ID, please contact us.

You can e-mail us at support@SimpleFilings.com or by using the Contact Us page of this site. Our fax number is 866-687-7779, and our phone number is 866-659-5246. Business hours are Monday-Friday, 8am-5pm Central excluding holidays. Our specialists look forward to assisting you.

SimpleFilings is a fast and secure solution for several of the most common new business filings, like LLC Formation or Incorporation, DBA Registration, obtaining your Federal Tax ID, and federal S-Corporation elections. But there may be other filings for you to perform both before and after starting your business. As a courtesy, we've listed some below:

• • Internal administration - LLCs require fewer administrative formalities than Corporations, but both require some. For example, LLCs must write and keep a document called an Operating Agreement which outlines basic ownership and management information. Many books have been written on the subject of LLC and Corporation administration, and they often include useful document templates. Find them at your library or bookstore.
• • Federal government filings - The IRS needs to know how to tax your new business. Filing forms such as IRS 8832, IRS 2553, and IRS 1023 can accomplish this. Other IRS filings, and filings with other Federal government agencies may be required as well. Local tax professionals can be good sources of information on this.
• • State government filings - Each state you do business in will have filing requirements such as state tax ID numbers, state tax returns, foreign business entity registration (if it is not the state you formed your LLC or Incorporated in), and annual business entity reports. Offices in each state such as the Secretary of State and Department of Revenue can help you determine which ones apply to your business. Also, remember that some states that offer S-Corporation taxation require separate S-Corporation election filings at the state level.
• • Local government filings - Each local jurisdiction you do business in may have filing requirements such as licenses, permits, etc. Offices in each jurisdiction such as the County Courthouse and City Hall can help you determine which ones apply to your business.
• • Insurance and trade requirements - Depending on the nature of your business, other non-government filings such as obtaining insurance may be necessary to comply with all applicable laws. Consult your insurance agent and applicable trade association.

Starting and running a business is a richly rewarding but never-ending process, and the responsibility for research and compliance is solely yours. But remember that the profits are solely yours as well.

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