S Corporations
The main difference between a C corporation and an S corporation is how the corporation is taxed.
What is the Purpose of the Form 2553 Election by a Small Business Corporation?
The purpose of Form 2553 is to convert your corporation from a C corporation to an S corporation. The S corporation status essentially changes the way a corporation is taxed. In S corporations the shareholders are taxed instead of the corporation itself. Whereas in a C corporation the shareholders and the corporation are taxed.
Can your corporation be changed to an S corporation?
Only if these conditions are met can the corporation be changed, so place close attention:
- It is a domestic corporation or entity,
- It has to have less than 100 shareholders there are certain conditions to this rule so please visit the website in order to read the special circumstances,
- The shareholders are individuals, estates or exemption organizations,
- The shareholders are not nonresident aliens,
- The stock is only one class- meaning all rights are identical in aspects of distribution and liquidation,
- It is not a bank institution that uses section 585 for accounting bad debts, an insurance company taxed under subchapter L of the code, a possessions corporation under section 936 and a domestic international sales corporation (DISC)
Will change the tax years to one the following,
- a natural business year,
- an ownership ear,
- a tax year elected under section 444,
- a tax year ending December 31, or;
- a tax year with a business purpose
Each shareholder must agree to switch an S corporation, and;
If one or more conditions are not met you can work with a business law firm located in the Northern Virginia region from cities such as Annandale, Arlington, Fairfax and Prince William to help you figure out the next course of action.
When can you convert to an S corporation?
Form 2553 must be completed and filed within 2 months and 15 days after the new tax year is adopted. There are certain conditions and exceptions to this rule so look online to see what can be done. A late election might also be an option but certain qualifications apply and can be seen on the website (https://www.irs.gov/pub/irs-pdf/i2553.pdf).
Where to File Form 2553 to become an S corporation?
The forms can be sent or faxed to the Internal Revenue Service Center.
If the business, office or agency is located in Connecticut, Delaware, District of Columbia, Florida, Georgia, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, or Wisconsin use the following:
Department of the Treasury Internal Revenue Service Center
Cincinnati, OH 45999
Or Fax it using (859) 669-5748
If the business, office or agency is located in Alabama, Alaska, Arizona, Arkansas, California, Colorado, Hawaii, Idaho, Iowa, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregano, South Dakota, Texas, Utah, Washington, or Wyoming use the following:
Department of the Treasury Internal Revenue Service Center
Ogden, UT 84201
Or Fax it using (801) 620-7116
What Happens Next after filing to be an S corporation?
You will be notified if the corporation’s election is accepted or denied. Certain regulations apply so see the website for more clarity but for further action, try contacting a business law attorney from Annandale, Arlington, Fairfax and Prince William counties, who can help you understand any further action you may wish to take.
What Information is needed for Form 2553?
Name and Address of the corporation
Employer Identification Number (EIN) – this is necessary to apply
Online- using website https://www.irs.gov/businesses/small-businesses-self-employed the EIN is issued as soon as the information is validated.
By telephone at 1-800-829-4933 or at 1-800-829-4059 for the deaf, hard of hearing or have a speech disability to obtain the EIN
Completing Form SS-4 and mailing or faxing it to obtain the EIN
The date of Election (see website for further reference)
Signature
Names and address of every shareholder for consent to the election
Written consent of each shareholder
The number of stocks each shareholder owns
Each shareholder’s social security number
The month and day the tax year ends for each shareholder
Any beneficiary or legal representative
Need help converting to an S Corporation?
If you live in the Northern Virginia area within the Louden, Annandale, Fairfax, Prince William and Arlington counties, you can look for business law firms that can help with the paperwork and the following actions afterward.
References: IRS Form 2553-Election by a Small Business Corporation
