Form 2553: Election by a Small Business Corporation

Form 2553 is used by an eligible corporation to elect S corporation status for federal tax purposes.

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Introduction

Form 2553, Election by a Small Business Corporation, is a federal tax form used by an eligible corporation or other qualifying entity to elect S corporation status. The election generally allows an eligible business to be treated as an S corporation for federal tax purposes.

This guide provides general information about Form 2553, including who may use the form, the information commonly needed, and the basic process for completing it. The information is intended to provide a simple overview of Form 2553 and its general purpose.

What Is Form 2553?

Form 2553 is used to make an election for eligible businesses to be treated as an S corporation for federal tax purposes. The form generally provides information about the business, shareholders, tax year, and the requested effective date of the election.

Form 2553 commonly involves:

Business information
Employer identification number
Business formation information
Shareholder information
Shareholder ownership
Tax year information
Requested effective date
S corporation election information
Shareholder consents
Supporting business records

The information reported on Form 2553 should generally be based on the business’s formation documents, ownership records, tax records, shareholder information, and other applicable business documentation.

Who Uses Form 2553?

Form 2553 may generally be used by eligible corporations and certain other qualifying entities that want to elect S corporation treatment for federal tax purposes.

Not every business qualifies to make an S corporation election. Eligibility can depend on the type of business, ownership, shareholders, number of shareholders, stock structure, and other applicable requirements.

What Information Is Needed?

The information needed to complete Form 2553 generally comes from the business’s formation documents, ownership records, shareholder information, tax records, and other business documentation. Accurate information can help ensure that the election is completed properly.

Common information includes:

Business legal name
Business address
Employer identification number
Date of incorporation or formation
State of incorporation or organization
Tax year information
Requested effective date
Shareholder names
Shareholder addresses
Shareholder identifying information
Number and percentage of shares owned
Shareholder consent information
Supporting business records

The specific information required may depend on the business’s ownership, structure, tax year, election date, and other circumstances.

How to Fill Out/Complete Form 2553

Form 2553 is generally completed by providing the business information, identifying shareholders, providing ownership information, selecting the applicable tax year and effective date, and obtaining the required shareholder consents.

The basic process is to gather the business and shareholder information, determine whether the business is eligible to make the election, complete the applicable sections, obtain required shareholder signatures or consents, and review the completed form before submitting it. The business should retain a copy of Form 2553 and supporting records.

Section 1

Enter the business’s identifying information. This generally includes the business name, address, employer identification number, state of incorporation or organization, and other applicable information.

The information should be reviewed carefully to make sure it is accurate and consistent with the business’s legal and tax records.

Section 2

Enter the requested effective date of the S corporation election and applicable tax year information. The election date should generally correspond with the business’s intended S corporation tax treatment.

Businesses should review their formation documents and tax records carefully when determining the applicable dates and tax year information.

Section 3

Enter applicable information for a qualified subchapter S subsidiary when the election involves a qualifying subsidiary. This section may not apply to every business.

Businesses should complete this section only when applicable and retain supporting ownership and organizational records.

Section 4

Enter information about the corporation’s shareholders. This generally includes shareholder names, addresses, identifying information, stock ownership, and other applicable information.

The shareholder information should be reviewed carefully to make sure it agrees with the corporation’s ownership records and supporting documentation.

Section 5

Obtain the required shareholder consent to the S corporation election. Shareholders generally provide applicable identifying information, ownership information, and consent to the election.

The corporation should review the shareholder information and signatures before submitting Form 2553. Supporting ownership records should also be retained with the election records.

Section 6

Complete any applicable information concerning the corporation’s tax year. Certain businesses may need to provide additional information depending on the tax year they select or the circumstances surrounding the election.

Businesses should review their accounting and tax records carefully to make sure the applicable tax year information is accurate.

Section 7

Provide any additional information required for the election. This may include explanations or other information applicable to the corporation’s circumstances.

Only information that applies to the business should generally be included. Supporting records should be retained for any information provided with the election.

Section 8

Review the completed Form 2553 and make sure all applicable information has been entered. Check the business information, employer identification number, effective date, tax year, shareholder information, ownership information, and required consents.

The completed election should generally be submitted according to the applicable filing requirements. The corporation should also keep a copy of Form 2553, shareholder consents, ownership records, and supporting business documents.

Final Review

Review Form 2553 after completing all applicable sections. Check the business information, employer identification number, tax year, requested effective date, shareholder information, ownership percentages, shareholder consents, signatures, and supporting records.

A final review can help identify reporting or filing errors before the election is submitted. Businesses should retain Form 2553, shareholder consent information, ownership records, formation documents, and supporting tax records with their business records.

Common Mistakes

Common Form 2553 mistakes may include entering incorrect business information, using an incorrect effective date, or providing incomplete shareholder information. Missing shareholder consents or signatures can also affect the election.

Other mistakes may include entering ownership information incorrectly, leaving required information incomplete, overlooking applicable eligibility requirements, submitting the election incorrectly, or failing to retain a copy of the completed form. Comparing Form 2553 with the business’s legal, ownership, and tax records before submitting it can help identify potential errors.

Related IRS Forms

Businesses may encounter other federal tax forms when establishing an entity, reporting business income, making tax elections, and reporting shareholder information. Different forms are used for different business structures and federal tax requirements.

Common related forms include:

Form 1120 for certain corporate income tax reporting
Form 1120-S for S corporation income tax reporting
Form 1065 for partnership income tax reporting
Form 8832 for certain entity classification elections
Form W-9 for certain taxpayer identification and certification purposes
Form 941 for certain employment tax reporting

The appropriate form depends on the business’s structure, election, ownership, activities, and other circumstances.

Where to File or Submit

Form 2553 is generally submitted according to the applicable filing requirements for an S corporation election. The appropriate submission method and filing location can depend on the business’s circumstances and other applicable requirements.

Businesses should review the applicable filing requirements before submitting Form 2553. A copy of the completed form, shareholder consents, ownership records, and supporting business documents should generally be retained for the business’s records.

Current IRS Form & Instructions

Businesses should use the applicable version of Form 2553 and its instructions when preparing the election. Forms and requirements can change, so the version used should correspond with the circumstances and tax year involved.

Before submitting Form 2553, review the form and instructions carefully and confirm that the information agrees with the business’s formation, ownership, shareholder, and tax records. This can help identify errors before the election is submitted.

Important Information / Disclaimer

This Form 2553 guide is provided for general informational purposes only and is intended to provide a basic overview of Form 2553 and common information associated with making an S corporation election. This information is not tax, legal, accounting, or financial advice, and S corporation eligibility and election requirements can vary depending on the business structure, ownership, shareholders, tax year, election date, and other applicable circumstances.

Businesses and their owners are responsible for determining their applicable filing, payment, recordkeeping, and reporting requirements, and information on this page may not cover every situation, exception, or special rule that may apply. When appropriate, businesses should consider seeking assistance from a qualified tax professional or other qualified advisor regarding their specific tax situation, business structure, S corporation eligibility, election requirements, or Form 2553 filing requirements.