Question

What is the process to elect S corporation status.

Answer 1

First, the corporation has to be formed.

According to IRS, the following qualifications apply to S ( small ) corporation status:

• Ii should be a domestic corporation with no foreign investors.
• It cannot have more than 100 stockholders
• The corporation has only one class of stock
• It must use the calendar year as the fiscal year ( December 31 year end)

IRS form 2553 must be used to file the election not more than 2 months and 15 days after the beginning of the tax year the election is to take effect. For a startup, it should be done in the first year of business. If, for example,you start your business on January 10, you must file the election for S corporation status not later than March 15 of that year, else your business will not be treated as an S corporation for that year.