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Who may elect S corp. tax treatment?

Posted by Bernard Dietz | Jun 06, 2007 | 0 Comments

Following up on this post regarding different forms of tax treatment for LLC's, I thought it would be helpful to briefly discuss who can elect S corp taxt treatment.  Because of all of the benefits of S corp tax treatment for Virginia LLC's and Virginia corporations, the IRS has certain rules regarding who may take those benefits.  If you're a Virginia LLC or Virginia corporation, you may elect S corp tax treatment:

  1. If you file Form 2553 with the IRS within their time deadline (generally within 2 months and fifteen days of formation or the beginning of the year);
  2. If you have no more than 100 shareholders (owners);
  3. If all of those shareholders are individuals, estates, or certain exempt organizations;
  4. If all of the shareholders are US residents (no nonresident alien shareholders allowed);
  5. If the company has only one class of stock (meaning every shareholder/owner has equal distribution rights);
  6. If the company is not engaged in one of the named ineligable types of businesses (banking, insurance, etc.);
  7. If your corporation or LLC has or adopts certain calendar year tax years; and
  8. all of the shareholders/members consent to the S corp tax election.

If your company satisfies all of those requirements, then you can enjoy the benefits of S corp taxt treatment.  The Form 2553 that you file to elect S corp tax treatment can be found at the IRS website here and the instructions for the Form 2553, which have more details on the requirements and process, can be found here (both forms open as a pdf).

About the Author

Bernard Dietz

Bernie Dietz is a Virginia lawyer and Virginia business attorney with more than 15 years of experience as both an attorney and a business executive, which gives him a unique view into the special needs of small to medium sized businesses. He has worked in business development, sales, and marketin...

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