S-Corp Election Package Generator

Q: What is IRS Form 2553 and when do I need to file it?

IRS Form 2553 is the Election by a Small Business Corporation form used to elect S-Corporation tax status under IRC Section 1362(a). You must file it by the 15th day of the 3rd month of the tax year you want the election to take effect (March 15 for calendar-year taxpayers), or at any time during the preceding tax year. For a new corporation, the deadline is within 75 days of formation. Late election relief is available under Rev. Proc. 2013-30 if you have reasonable cause.

Q: How much can I save by electing S-Corp status?

The primary S-Corp tax savings come from avoiding self-employment tax on business profits above a reasonable salary. For example, on $150,000 of net business income in 2026, an S-Corp election can save approximately $8,687 per year compared to a sole proprietorship or single-member LLC, by paying yourself a reasonable salary (e.g., $75,000) and taking the remaining $75,000 as distributions not subject to the 15.3% SE tax. The breakeven point where S-Corp becomes beneficial is typically $50,000-$80,000 in annual net self-employment income.

Q: Do I need a board resolution to elect S-Corp status?

Yes. The IRS requires that all shareholders consent to the S-Corp election on Form 2553. For proper corporate governance, you should also have a formal board resolution (for corporations) or member consent resolution (for LLCs) authorizing the election. This document should reference IRC Section 1362(a), specify the effective date, and be signed by all shareholders or members. While the IRS technically only requires the Form 2553 shareholder consents, having a separate resolution protects you in case of future disputes or audits.

Q: Does my state automatically recognize federal S-Corp election?

Not always. While most states automatically follow the federal S-Corp election, several states require a separate state-level election or do not recognize S-Corp status at all. States that require separate filings include New York, New Jersey, and California (which taxes S-Corps at 1.5% of net income with a minimum $800 franchise tax). Some states like New Hampshire and Tennessee tax S-Corp income at the entity level. Always check your specific state requirements when electing S-Corp status.

TaxStackHub

What is IRS Form 2553 and when do I need to file it? +

IRS Form 2553 (Election by a Small Business Corporation) is the form you file to elect S-Corporation tax status under IRC Section 1362(a). For calendar-year taxpayers, you must file by March 15 of the tax year you want the election to take effect, or at any time during the preceding tax year. For new businesses, the deadline is within 75 days of formation. If you miss the deadline, late election relief is available under Rev. Proc. 2013-30 if you have reasonable cause.

How much can I save with an S-Corp election? +

The primary S-Corp savings come from avoiding the 15.3% self-employment tax on business profits above your reasonable salary. On $150,000 of net income, you could save approximately $8,687/year by paying yourself a $75,000 salary and taking $75,000 as distributions. The breakeven point is typically $50,000-$80,000 in annual net self-employment income, after accounting for additional payroll costs ($500-$2,000/year for payroll service).

Do I need a board resolution to elect S-Corp status? +

Yes. While the IRS technically only requires shareholder consents on Form 2553, proper corporate governance requires a formal board resolution (corporations) or member consent resolution (LLCs) authorizing the election. This protects you in future disputes or audits by documenting that the election was properly authorized by all owners.

Does my state automatically recognize federal S-Corp election? +

Not always. Most states follow the federal election, but some require separate filings. California taxes S-Corps at 1.5% of net income (minimum $800 franchise tax). New York and New Jersey require separate state S-Corp elections. New Hampshire and Tennessee tax S-Corp income at the entity level. Always check your specific state's requirements.

What is a "reasonable salary" for S-Corp owners? +

The IRS requires S-Corp shareholder-employees to pay themselves a reasonable salary before taking distributions. Factors include: duties, time devoted, comparable industry pay, and company revenue. A common benchmark is 40-60% of net business income. Setting salary too low risks IRS reclassification of distributions as wages plus penalties. The IRS specifically targets S-Corps paying minimal salary with large distributions.

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