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ServiceThe S-Corporation election is a tax classification, not an entity type. For profitable single-member LLCs and closely-held corporations, electing S-Corp status under Subchapter S of the Internal Revenue Code can save thousands per year in self-employment tax. We file IRS Form 2553 and coordinate state-level elections.
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S-Corp Election
S-Corp Election · all 51 jurisdictions

Elect S-Corp status. Save thousands in self-employment tax.

The S-Corporation election is a tax classification, not an entity type. For profitable single-member LLCs and closely-held corporations, electing S-Corp status under Subchapter S of the Internal Revenue Code can save thousands per year in self-employment tax. We file IRS Form 2553 and coordinate state-level elections.

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Filed within 24 hours · IRS acceptance in 4–8 weeks · Late-election relief available
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What it is

The S-Corp election, with the math made simple.

S-Corp is not a separate kind of company. It is a federal tax election that an existing LLC or Corporation can make by filing IRS Form 2553. Once accepted, the entity is taxed as a pass-through (like a partnership) and the owner can split compensation between a W-2 salary and tax-distinct profit distributions.

Why founders elect it: Self-employment tax (Social Security and Medicare, 15.3% combined) applies to LLC pass-through income up to the Social Security wage base. After the S-Corp election, only the W-2 salary portion is subject to payroll tax; the distribution portion is not. The savings can be substantial.

An example. A single-member LLC consultant in Texas with $150,000 in net profit pays approximately $22,950 in self-employment tax (15.3% × $150,000). If the same business elects S-Corp status and pays the owner a $75,000 reasonable salary, payroll tax drops to about $11,475, and the remaining $75,000 is taken as a distribution with no self-employment tax. Annual savings: roughly $11,475.

The trade-offs: The S-Corp election creates new obligations. You must run payroll for yourself (typically $40–80/month), file an annual Form 1120-S (typically $800–1,500 to a CPA), pay yourself a reasonable salary or face IRS reclassification, and meet state-level franchise tax minimums (California's is $800/year). The break-even where savings exceed new costs is roughly $50,000–60,000 in net profit.

Who it is for

Is this the right service for you?

01 · Profitable

Profitable LLCs over $60k net

Single-member LLCs with net profit over about $60,000 typically save more in self-employment tax than the new costs add.

02 · Consultants

Independent consultants & freelancers

Knowledge-work professionals are the classic S-Corp use case. Reasonable salary for the work performed plus distribution from profit.

03 · Pro services

Professional service firms

Doctors, lawyers, accountants, architects, and similar high-income service providers.

04 · Family

Family businesses

Closely-held US-owner businesses that want pass-through taxation plus the ability to take some profit as a distribution.

05 · Real estate

Active real estate operators

Real estate professionals who materially participate, especially those with US-citizen ownership only.

06 · Late-elect

Late elections needed

Missed the March 15 deadline? IRS provides late-election relief under Rev. Proc. 2013-30 with reasonable cause. We file the relief request.

What we'll set up for you

A clean handoff, in four steps.

You give us the basics. We handle the state, the IRS, and the compliance clock so you can focus on the business.

01 · Name + Brand

A name that's actually available.

Real-time check against the state register, USPTO trademark database, and matching domains.

02 · State filing

Filed with the Secretary of State.

We submit your Articles, pay the state fee on your behalf, and return the stamped certificate.

03 · Federal IDs

EIN + the right tax setup.

Federal Employer ID with the IRS, plus state tax accounts when your business needs them.

04 · Stay compliant

Registered Agent + deadline tracking.

Your agent on file in every state, with every renewal and annual report tracked in one calendar.

How it works

Four steps. We do most of them.

Step 1

Run the savings math

We project your self-employment tax savings vs. the new costs (payroll service, 1120-S preparation, state minimum franchise tax). If the math works, we recommend electing. If not, we say so.

Step 2

Verify eligibility

Eligibility checks: all owners are US citizens or resident aliens, owner count is 100 or fewer, ownership is held by individuals or qualifying trusts (not partnerships, corporations, or non-US persons), and there is only one class of stock or LLC interest.

Step 3

Prepare and file Form 2553

We prepare Form 2553 with the effective date, all owner consents, and supporting elections (Section 1361, late-election relief if needed). The form is filed by certified mail with tracking; we also submit the CCC online code when available.

Step 4

Set up payroll and track deadlines

Once elected, you must run W-2 payroll for yourself. We coordinate with our payroll partner so your first paycheck is timely and the year's salary is on pace. The Compliance Suite tracks your new 1120-S deadline (March 15) and quarterly estimated taxes.

Compare

What you save by filing through us.

Compared to the alternatives most founders consider.

Do It Yourself
$0
Download Form 2553 from IRS.gov.
  • Save the service fee
  • Easy to fill out incorrectly
  • No late-relief if you miss March 15
  • No reasonable-salary analysis
  • No state election coordination
  • No payroll setup
CPA
$300–800
Standalone S-Corp election prep.
  • Filed correctly
  • Reasonable-salary advice
  • Audit defense if asked
  • Hourly billing
  • No payroll coordination
  • No compliance tracking
File.Business
$99
Free on Growth and Enterprise.
  • Form 2553 prepared and filed
  • Late-election relief if needed
  • State-level election coordinated
  • Reasonable salary documented
  • Payroll setup included
  • 1120-S deadline tracked
FAQ

Frequently asked questions.

When is the deadline to elect S-Corp status?
For an existing entity, Form 2553 must be filed within 2 months and 15 days after the start of the tax year for which you want the election to apply. For a calendar-year entity, that means March 15. For a new entity, the same 75-day window starts from the date of incorporation or organization.
What if I missed the March 15 deadline?
The IRS offers late-election relief under Revenue Procedure 2013-30 if you can show reasonable cause for the delay and have not yet filed a return inconsistent with S-Corp treatment. We file the relief request as part of Form 2553 with the explanation. Approval is granted in the vast majority of cases.
How much do I have to pay myself in salary?
The IRS requires reasonable compensation, what you would pay someone else to do the work you do. There is no statutory minimum, but courts have reclassified low salaries as disguised distributions. Common benchmarks: 40–60% of gross revenue for solo professionals; salary surveys for your industry and location; what you would earn doing the same job as a W-2 employee. We document the analysis in your records.
What states require a separate S-Corp election?
Most states automatically recognize the federal S-Corp election. States that require a separate election or filing: New York (Form CT-6), New Jersey (Form CBT-2553), Arkansas (form not standard, file with annual return). States that do not recognize S-Corp at all (your S-Corp is treated as a C-Corp for state tax): District of Columbia, New Hampshire (uses Business Profits Tax), Tennessee (treats as C-Corp for excise tax), Louisiana (excise tax).
Can my LLC elect S-Corp directly, or do I need to convert to a Corporation first?
An LLC can elect S-Corp tax treatment directly without converting. Internally it remains an LLC under state law; for federal income tax it is treated as an S-Corporation. You file Form 8832 (entity classification) and Form 2553 (S election), we handle both. No state filing is required to make the federal election.
How does S-Corp affect my self-employment tax?
After the election, only the W-2 salary portion of your compensation is subject to FICA (Social Security + Medicare = 15.3%, half paid by the corporation, half by you). The remaining profit, taken as a distribution, is exempt from self-employment tax. The salary is also subject to federal income tax withholding.
Are there S-Corp situations I should avoid?
S-Corp is wrong for: (a) businesses below the break-even profit (~$50–60k); (b) businesses planning to raise venture capital (S-Corp ownership restrictions are incompatible with most VC); (c) businesses with foreign owners (S-Corps cannot have non-US-person owners); (d) businesses with significant passive income (real estate rentals can trigger built-in gains issues); (e) very volatile-profit businesses where the salary infrastructure is overhead in a bad year.
Can I revoke the S-Corp election later?
Yes, but with constraints. Revocation requires consent of shareholders holding more than 50% of stock. Once revoked, you generally cannot re-elect S-Corp for 5 tax years without IRS consent. Plan revocation carefully, it is a one-way door for half a decade.
What is Form 1120-S and when is it due?
Form 1120-S is the annual S-Corporation income tax return, due by March 15 of the following year (or the 15th day of the 3rd month after year-end for fiscal-year entities). The corporation files 1120-S; the income flows through to shareholders via Schedule K-1, which each shareholder uses on their personal return.

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