To make a valid election to be an S corporation, a corporation must meet the requirements for being an S corporation and file Form 2553 with the IRS. Once a valid election is in place, the election remains in force until revoked or terminated.
As for the timing, the election to be an S corporation must be filed on or before the fifteen day of the third month of the tax year in which the S corporation status would begin. Thus, a C corporation that is a calendar year taxpayer and wishes to become an S corporation starting on January 1, 2024 would need file Form 2553 on or before March 15, 2024 (can file anytime during 2023). For newly-formed corporations, the two-and-a-half-month deadline begins at the earliest occurrence of these events:
– The corporation has shareholders
– The corporation acquires assets
– The corporation commences business operations
The IRS may accept late filings for reasonable causes (you need to explain this in Form 2553).
Also, to make a valid election, all shareholders must consent to the election in writing (they need to sign Form 2553). A consent extension may be granted in certain circumstances.
0:00 Introduction
0:10 Filing Form 2553
0:45 Timing of the election
2:02 Timing exception (new corporations)
3:23 Shareholder consent
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