Include a statement that the company had reasonable cause or inadvertently failed to file Form 2553 on time. Explain the circumstances in detail. The attached declaration must be signed by each shareholder. A letter from the IRS stating that Form 2553 has been accepted. Form 2553 should normally be submitted no later than 2 months and 15 days after the date indicated for item E. Details and exceptions can be found above under Election Time and Relief for Late Elections. Form 2553 consists of four parts, each dealing with specific types of information. Let`s explore the form together. If the IRS is considering whether Form 2553 has been filed, the acceptable proof of filing is: A corporation or other legal entity that qualifies to be treated as a corporation files this Form to make an election under Section 1362(a) as an S corporation. Once you complete Form 2553, you will need to file it at one of two locations, depending on where you file it. In the case of an election submitted before the effective date set out in Article E, only shareholders holding shares on the day of the election must approve the election. Before preparing documents, you must first verify that your company meets the requirements for filing as an S-Corp. All of the following conditions must be met to file Form 2553: A corporation or other entity eligible to be treated as a corporation must use Form 2553 to make an election under paragraph 1362(a) as an S.
corporation. A corporation that qualifies to be treated as a business that meets certain criteria described below will be treated as a business as of the effective date of S Corporation`s election and will not be required to file Form 8832, Entity Classification Election. I love helping businesses of all sizes succeed, from start-ups to existing small and medium-sized businesses. I regularly advise corporate clients on a variety of legal matters, including incorporation, day-to-day governance, review and drafting of commercial and other agreements, business acquisitions and sales, and commercial and residential real estate matters, including sale, purchase and lease. As a Michigan and Florida attorney, I also advise clients on real estate matters involving businesses and individuals who own real estate in both states, whether commercial, residential, or vacation/investment real estate. I also regularly assist not-for-profit organizations in obtaining and maintaining tax-exempt status and provide general legal advice on all matters affecting public charities, private foundations and other not-for-profit organizations. These topics explain what Form 2553 is and how S status can benefit small businesses: IRS Form 2553 is used by C companies or limited liability companies (LLCs) that choose to be taxed as an S corporation. In this way, companies may be able to save taxes because S companies are not subject to corporate income tax. It is (a) a domestic corporation or (b) a domestic corporation that is eligible to be treated as a corporation that files Form 2553 on time and meets all of the other criteria listed below.
If Form 2553 is not filed on time, see Adjustment for Subsequent Late Elections. In Part I of Form 2553, enter all voting information. Part I takes the most time and requires the following information. Form 2553 informs the IRS that you want to choose S Corp. status. Upon receipt and verification, the IRS will then send a letter to your company confirming its choice for this tax treatment or rejecting your application. You may use certain IRS-designated private delivery services (PDS) to submit this election. For a current list of designated services, see IRS.gov/PDS. A calendar year The small business corporation begins its first taxation year on January 7. The 2-month period ends on March 6 and 15 days after March 21. To be an S corporation beginning with its first taxation year, the corporation must file Form 2553 during the period beginning January 7 and ending March 21.
Since the business did not have a previous taxation year, an election made before January 7 is not valid. You may decide to start your small business for a number of reasons – limited liability protection and fundraising features are just a few of them. However, its consideration has disadvantages, namely the risk of double taxation by shareholders. One way to avoid this is to file IRS Form 2553 to become an S company. Enter the name and address of each shareholder or former shareholder who must approve the election. If the shares of the corporation are held by a nominee, guardian, custodian or agent, enter the name and address of the person for whom the shares are held. If a limited liability company (LLC) holds shares of the corporation with a single member and the LLC is treated as an unaccounted entity for federal income tax purposes, enter the name and address of the owner. The owner must be authorized to be a shareholder of company S. The IRS offers relief to those who file late-filing provided they meet certain requirements, including: Again, you should review IRS resources and their instructions on Form 2553 to ensure that your client meets all qualifications for late election facilitation. If they meet the qualifications, you must complete Form 2553 with FILED ACCORDING TO REV. PROC. 2013-30 above and attach a statement explaining a reasonable reason.
Form 2553 and the declaration must be signed by each shareholder. Read this article to learn more about S Corps and the benefits an S Corp can have for your business. Small businesses must file Form 2553 with the IRS within a certain period of time to be considered for S-company status, as required by law. Here are the details of when your business must file Form 2553: Example 2. Determine when the election will come into effect when a newly incorporated company chooses S status: A newly formed company begins operations on June 15, 2018 and decides to immediately opt for S status. For the election time rule, the first month of the corporation ends on July 14 and the second month of the corporation ends on August 14. Therefore, the 15th day of the third month falls on August 29, 2018, the deadline to submit the election S. Form 2553: Small Business Voting is used by small businesses that choose to be taxed as an S Corporation rather than the standard C Company business structure assigned by the IRS.
Application Form 2553 has specific qualifications and requirements for the filing deadline. To learn more about Form 2553, click here, including eligibility requirements, deadlines and whether it is right for your business. No. There is currently no way to submit this form online. To complete Form 2553, you can mail or fax the form to the IRS. Practitioners will typically find that the first of these three dates is triggered by the legal incorporation process (the date the articles are filed or registered with the Secretary of State). At present, although the shares may not have actually been issued, it can be assumed that the corporation has shareholders and is therefore considered to have met one of the three criteria. (See Rev. Rul. 72-257, in which share subscribers were treated as shareholders from the date of incorporation.