What Are All the IRS Filings for an S Corp?

By Terry Masters

A "C" corporation is a standard corporation, while an "S" corporation has elected a special tax status with the IRS, allowing it to be taxed as a flow-through entity that passes its income through to its shareholders instead of filing a return in its own name and paying taxes at the corporate rate. To ensure that the IRS receives taxes on that income, however, it strictly limits the number and type of shareholders that an S corporation can have. The IRS filings to elect, maintain and terminate S corporation status are specific because the IRS requires proof that the corporation and its shareholders are eligible for S corporation tax treatment.

Written Consent

Subchapter S of the Internal Revenue Code requires all shareholders to consent to an S corporation election in writing. If even one shareholder disagrees, the corporation cannot make the election. The IRS Subchapter S election form contains a consent statement section for all shareholders to sign. However, a separate statement of consent can be attached from each shareholder if the space provided by the form is inadequate. To terminate the S election, shareholders holding at least 50 percent of the outstanding stock in the corporation must consent to the termination. The termination of consent should also be in writing.

Election Form

A corporation must file IRS Form 2553, Election by a Small Business Corporation, to make an S corporation election. This form enables a corporation to prove that it meets the qualification for S corporation status. It requires the corporation to identify its shareholders and establish that they are eligible shareholders under the law. Filing the form does not guarantee that the IRS will approve the election. A corporation must wait for an approval letter from the IRS, indicating if and when the election will go into effect before it can start operating as an S corporation.

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Tax Forms

S corporations are required to file an annual federal informational tax return on IRS Form 1120S. This form mirrors a corporate tax return, but does not require the S corporation to pay taxes on its income. It must be submitted in a timely fashion, however, so the IRS knows how much corporate income should be distributed to shareholders. An S corporation is also required to complete an IRS Schedule K-1 for each shareholder. This forms notifies the shareholder of his pass-through amounts of profits and loss from the business. Copies of the K-1 schedules are also sent to the IRS.


The IRS does not publish an S corporation termination form. An S corporation can terminate its election with a majority vote by notifying the IRS of the intent to terminate in writing and the effective date. The same IRS center that accepted the corporation's election form can accept a letter to terminate it. It is advisable to attach a copy of the written consent to terminate by the shareholders to the letter.

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How to Convert a C Corporation to an S Corporation With Shareholder Approval



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The Termination of S Corp Status

S corporation status is an IRS-sanctioned tax designation that allows a corporation to retain liability protection for its shareholders but lets them be taxed like a partnership.This means that the S corporation is not taxed directly, but its shareholders add their share of the business’s annual income and losses to their personal returns and personally pay taxes on those amounts. To choose this status, the corporation must have fewer than 100 shareholders and cannot have any nonresident alien shareholders. It can only have one class of stock and cannot participate in certain industries. A corporation can have its S-corp status rescinded by the IRS or its shareholders can choose to give it up.

Can an LLC File a 2553?

A LLC can elect to be taxed as a C or an S corporation. A C corporation is taxed on its profits and has to pay federal income taxes. Form 2553 allows a LLC to stop paying corporate income taxes. An LLC files Form 2553 to switch from filing as a C corporation to filing as an S corporation. Like a partnership, an S corporation can be a pass-through entity.

How to Start a California S Corporation

To start a corporation in California, you file a document called articles of incorporation with the Secretary of State’s office. Every California corporation starts as a C corporation – which means that it is taxed according to the provisions of Subchapter C of the Internal Revenue Code. To convert your C corporation to an S corporation, you must file the required form with the IRS requesting that your corporation be taxed under Subchapter S of the Internal Revenue Code. Both the Secretary of State and IRS provide the necessary forms and information to facilitate starting an S corporation in California.


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