A business entity that wishes to become an S corporation must file Form 2553 with the IRS. However, before a business can submit this form, it must first qualify for S corporation status and must file articles of incorporation with the state to incorporate the business.
Articles of Incorporation
People who want to form a corporation must complete and file articles of incorporation with their state regulatory agency, which is usually the secretary of state. While laws vary among states, the information contained in the articles typically includes the business name and address, the description of business purpose, the name and address of the registered agent and incorporator, and the number of shares the corporation is authorized to issue.
S Corporation Status
Corporations are separate and distinct legal entities from their owners -- the shareholders. Traditional corporations are C corporations and are typically taxed twice. Corporations first pay taxes on earned profits and again at the shareholder level when shareholders pay taxes on the dividends they receive. To avoid this double taxation, some corporations elect to become S corporations for tax purposes. As an S corporation, a corporation is not taxed directly, but rather its profits and losses are passed through to the shareholders, who pay taxes on their personal income tax returns. To change its status from a C-corp to an S-corp, a corporation must file Form 2553, Election by a Small Business Corporation, with the IRS. However, it must qualify as an S corporation before doing so. Generally, this requires that the business entity is already a corporation, has no more than 100 shareholders and has one class of stock.