S Election (Form 2553)

The S election is the filing that turns an eligible corporation or LLC into an S corporation for tax purposes. It is made on Form 2553, signed by all shareholders, and is generally due no later than two months and 15 days after the start of the tax year for which it is to take effect (March 15 for a calendar-year business), or at any time during the preceding year. A newly formed entity measures the deadline from the earliest of when it first has shareholders, acquires assets, or begins doing business. The election requires the entity to meet all S corporation eligibility rules on every day of the year: eligible shareholders, a 100-shareholder cap, and one class of stock. Missing the deadline does not necessarily forfeit the year, because the IRS grants late-election relief in most reasonable-cause cases.