What Is an S Corporation?

An S Corporation is a C Corporation that elects “Subchapter S” status. All S Corporations begin their lives as C Corporations; Corporations elect to change their status to S Corporations.

The S Corporation Election is made by the filing IRS Form 2553 before the expiration of the 15th day of the third month of its tax year. You make your election by using the instructions to Form 2553 here, and using the election form 2553 which you can find here.

S Corporation Requirements

Not all corporations are eligible to become S Corporations. S Corporations must

  • Have not more than 100 shareholders.
  • Be a corporation chartered in a US state–not in a foreign country.
  • The shareholders can only be live people, estates, and limited types of exempt organizations (i.e., no C Corps can be shareholders.
  • No nonresident alien shareholders.
  • Only one class of stock.
  • Not a bank, insurance company, professional corporation.

S Corporations are still corporations–they must make periodic filings in their states of organization, and they must meet corporate formalities.

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