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Instructions for Form 2553
(Rev. December 2020)
(For use with the December 2017 revision of Form 2553, Election by a Small
Business Corporation)
Department of the Treasury
Internal Revenue Service
Section references are to the Internal Revenue Code unless
otherwise noted.
Future Developments
For the latest information about developments related to
Form 2553 and its instructions, such as legislation enacted
after they were published, go to IRS.gov/Form2553.
General Instructions
Purpose of Form
A corporation or other entity eligible to elect to be treated as
a corporation must use Form 2553 to make an election under
section 1362(a) to be an S corporation. An entity eligible to
elect to be treated as a corporation that meets certain tests
discussed below will be treated as a corporation as of the
effective date of the S corporation election and doesn’t need
to file Form 8832, Entity Classification Election.
The income of an S corporation generally is taxed to the
shareholders of the corporation rather than to the corporation
itself. However, an S corporation may still owe tax on certain
income. For details, see Tax and Payments in the
Instructions for Form 1120-S, U.S. Income Tax Return for an
S Corporation.
Who May Elect
A corporation or other entity eligible to elect to be treated as
a corporation may elect to be an S corporation only if it meets
all the following tests.
1. It is (a) a domestic corporation, or (b) a domestic entity
eligible to elect to be treated as a corporation, that timely files
Form 2553 and meets all the other tests listed below. If Form
2553 isn’t timely filed, see Relief for Late Elections, later.
2. It has no more than 100 shareholders. You can treat
an individual and his or her spouse (and their estates) as one
shareholder for this test. You can also treat all members of a
family (as defined in section 1361(c)(1)(B)) and their estates
as one shareholder for this test. For additional situations in
which certain entities will be treated as members of a family,
see Regulations section 1.1361-1(e)(3)(ii). All others are
treated as separate shareholders. For details, see section
1361(c)(1).
3. Its only shareholders are individuals, estates, exempt
organizations described in section 401(a) or 501(c)(3), or
certain trusts described in section 1361(c)(2)(A).
For information about the section 1361(d)(2) election to be
a qualified subchapter S trust (QSST), see the instructions
for Part III. For information about the section 1361(e)(3)
election to be an electing small business trust (ESBT), see
Regulations section 1.1361-1(m). For guidance on how to
convert a QSST to an ESBT, see Regulations section
1.1361-1(j)(12). If these elections weren’t timely made, see
Rev. Proc. 2013-30, 2013-36 I.R.B. 173, available at
IRS.gov/irb/2013-36_IRB#RP-2013-30.
4. It has no nonresident alien shareholders (other than as
potential current beneficiaries of an ESBT).
5. It has only one class of stock (disregarding differences
in voting rights). Generally, a corporation is treated as having
only one class of stock if all outstanding shares of the
corporation's stock confer identical rights to distribution and
liquidation proceeds. See Regulations section 1.1361-1(l) for
details.
6. It isn’t one of the following ineligible corporations.
a. A bank or thrift institution that uses the reserve method
of accounting for bad debts under section 585.
b. An insurance company subject to tax under
subchapter L of the Code.
c. A domestic international sales corporation (DISC) or
former DISC.
7. It has or will adopt or change to one of the following tax
years.
a. A tax year ending December 31.
b. A natural business year.
c. An ownership tax year.
d. A tax year elected under section 444.
e. A 52-53-week tax year ending with reference to a year
listed above.
f. Any other tax year (including a 52-53-week tax year)
for which the corporation (entity) establishes a business
purpose.
For details on making a section 444 election or requesting
a natural business, ownership, or other business purpose tax
year, see the instructions for Part II.
8. Each shareholder consents as explained in the
instructions for column K.
See sections 1361, 1362, and 1378, and their related
regulations for additional information on the above tests.
A parent S corporation can elect to treat an eligible wholly
owned subsidiary as a qualified subchapter S subsidiary. If
the election is made, the subsidiary's assets, liabilities, and
items of income, deduction, and credit generally are treated
as those of the parent. For details, see Form 8869, Qualified
Subchapter S Subsidiary Election.
When To Make the Election
Complete and file Form 2553:
•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 preceding the tax year it is
to take effect.
For this purpose, the 2-month period begins on the day of
the month the tax year begins and ends with the close of the
day before the numerically corresponding day of the second
calendar month following that month. If there is no
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