What Is IRS Form 2553? A Complete Guide for Small Business Owners

If you're a small business owner looking to reduce your tax liability, IRS Form 2553 might be your golden ticket. This crucial document allows eligible businesses to elect S corporation status, which can offer significant tax benefits. But who should file Form 2553—and why?
In this guide, the tax pros at TAXtical break down everything you need to know about Form 2553, including eligibility, timing, and why it might be a smart move for your business.

What Is IRS Form 2553?

Form 2553, officially titled Election by a Small Business Corporation, is the IRS form used by qualifying corporations and LLCs to elect S corporation status for federal tax purposes.
By filing this form, a business chooses to be taxed as an S corp, which means that profits and losses "pass through" to the owners’ personal tax returns. This helps avoid the double taxation typically associated with C corporations.

Who Should File Form 2553?

Form 2553 is intended for:

• Domestic corporations (C corps)

• Eligible LLCs that want to be taxed as S corporations

To file Form 2553, your business must meet the following requirements:

• Be a domestic corporation

• Have no more than 100 shareholders

• Have only allowable shareholders (individuals, certain trusts, and estates—but not partnerships or corporations)

• Have only one class of stock

If your business meets these criteria and you’re looking to optimize your tax situation, filing Form 2553 could be beneficial.

Why File Form 2553? (Benefits of S Corporation Election)

Filing Form 2553 and electing S corp status comes with several tax advantages:

1. Avoid Double Taxation

Unlike C corps, S corps are pass-through entities. This means profits are taxed only once—on the shareholders’ personal returns.

2. Potential Payroll Tax Savings

As an S corp owner, you can pay yourself a reasonable salary and take additional profits as distributions, which are not subject to self-employment tax. This can result in significant savings.

3. Credibility and Flexibility

Electing S corp status can add a level of credibility to your business and give you more flexibility in how you pay yourself and distribute profits.

When to File Form 2553

Timing matters! To be effective for the current tax year, Form 2553 must be filed:

• No later than 2 months and 15 days after the beginning of the tax year the election is to take effect, or

• Any time in the previous tax year before the desired effective date

If you miss the deadline, you may still qualify for late election relief, but that requires additional steps.

How to File Form 2553

Filing Form 2553 is relatively straightforward:

1. Download the form from the IRS website.

2. Complete the required sections, including:

   • Basic entity information

   • Shareholder details

   • Consent from all shareholders

3. Submit it to the IRS by mail or fax (based on your business location).

Pro Tip from TAXtical: Even small mistakes can delay your S corp election. Let our team review and file your Form 2553 to ensure a smooth and timely process.

Final Thoughts

If you’re a business owner wondering how to reduce your tax burden and keep more of what you earn, filing IRS Form 2553 might be the right move. It’s not for everyone—but for many LLCs and corporations, electing S corp status is a smart tax strategy.

Need help deciding if it’s right for you? TAXtical is here to help. Our expert tax professionals can guide you through every step of the process.

Ready to file Form 2553 or have more questions?
👉 Contact TAXtical today and schedule your free consultation!