An LLC does not have to become a corporation to be taxed like one. By filing IRS Form 2553, an eligible LLC can be taxed as an S corporation — which can reduce self-employment tax once the business is making a steady profit. Here is who qualifies, when to file, and what changes afterwards.
1. Why owners elect S-Corp status
By default, all of a single-member LLC's profit is subject to 15.3% self-employment tax. As an S corporation, the owner who works in the business is paid a reasonable salary (with payroll taxes), and the remaining profit can be taken as distributions that are not subject to self-employment tax.
The saving only outweighs the extra cost — payroll, a separate business tax return and bookkeeping — once profit is comfortably above a reasonable salary for your work. Ask a tax professional to run the numbers for your situation.
2. Who can elect
According to the IRS Form 2553 instructions, the business must:
- Be a domestic corporation or a domestic entity (such as an LLC) eligible to be treated as a corporation.
- Have no more than 100 shareholders.
- Have only allowable shareholders — individuals, estates, exempt organisations or certain trusts. Partnerships and corporations cannot be shareholders.
- Have no nonresident alien shareholders.
- Have only one class of stock.
Important for international founders: if any owner is a nonresident alien, the LLC cannot be an S corporation. Foreign-owned LLCs usually stay as disregarded entities or partnerships — see starting a US LLC as a non-resident.
3. The deadline
Form 2553 must be filed no more than 2 months and 15 days after the beginning of the tax year the election is to take effect, or at any time during the tax year before. For a calendar-year business that wants S-Corp status from January 1, that means filing by about March 15.
A new LLC's first tax year starts when it begins business, so the 2-month-15-day window runs from that date.
4. How to file Form 2553
- Get an EIN for the LLC first. If you do not have one yet, we can get it for you.
- Complete Form 2553 with the LLC's legal name, EIN, the date the election should take effect, and the tax year.
- Collect every owner's consent. Each shareholder signs and dates the form (or a separate consent statement).
- Mail or fax it to the IRS service centre for your state. The IRS lists the address and fax number by state on its "Where to file Form 2553" page. There is no standalone online filing.
An LLC that files Form 2553 does not also need to file Form 8832 — the IRS instructions say an eligible entity making the S election "doesn't need to file Form 8832". The IRS says you should generally receive a determination within 60 days. Our S-Corp election service prepares and files it for you.
5. Missed the deadline?
You may still qualify for late-election relief. The IRS instructions allow relief to be requested within 3 years and 75 days of the intended effective date, with a statement explaining the reasonable cause for filing late. If the relief is granted, the election is treated as if it had been filed on time.
6. What changes after you elect
- Payroll. The IRS says S corporations "must pay reasonable compensation" to a shareholder-employee before taking non-wage distributions. You will need to run payroll for yourself.
- A separate tax return. The business files Form 1120-S by the 15th day of the 3rd month after its tax year ends — normally March 15 (moved to the next business day when it falls on a weekend).
- Your LLC stays an LLC under state law. Only its federal tax treatment changes, so your state filings and annual report continue as before.
Not sure whether an S-Corp suits you? Compare the options in LLC vs S-Corp vs C-Corp, or learn more about S corporations.
Incofile is not a tax adviser. Quotes are from the IRS Form 2553 and Form 1120-S instructions and irs.gov guidance, checked September 2026.