You can form an S Corp by filing Form 2553 with the Internal Revenue Service (IRS). This section of the form applies to qualified trusts under Subchapter S (QSST). A QST is an estate planning tool that comes into effect when a shareholder of S Corporation dies and his or her ownership is transferred to a trust with a single beneficiary. If this does not apply to your situation, you can skip this section. In addition, a business form 2553 must indicate the names and addresses of all owners/shareholders. It must include the social security numbers of these individuals (or EIN if the shareholder is an estate or trust) and a form of signed and dated consent. The form must indicate the number of shares that each individual owns. It is important to note that in states with relevant laws, shares are considered community property. Therefore, a husband and wife are considered individual shareholders, even if the share is owned or managed by the name of a single spouse. There are three steps to complete Form 2553 and choose S Corp status for your small business: Businesses can file Form 2553 by fax or mail. The IRS website contains a list of the appropriate address or fax number to use based on the status in which the company is based: www.irs.gov/pub/irs-pdf/i2553.pdf. Form 2553 cannot be filed online.
Corporations classified as C Corporation or LLC may file Form 2553 to benefit from the tax treatment of S corporations. It is important to note that from a legal point of view, an LLC remains an LLC if it chooses S-Corporation status. However, the LLC is taxed as an S corporation at the federal level. Form 2553 helps businesses avoid double taxation. This form must be submitted no later than 2 months and 15 days after the beginning of the taxation year in which the election is to take effect. For newly incorporated corporations, the tax year begins on the day the business is created. The procedure for filing Form 2553 is described on the IRS website. It contains identifying information for the Company and its shareholders, the signed consent of each shareholder and information about the Company`s tax reporting schedule. Form 2553 can be faxed or mailed to an IRS regional office. Section I is for late applicants. For more information on releasing late applicants, see the “General” section of the IRS instructions on Form 2553. Form 2553 is the IRS`s choice through a small business corporation form.
Any small business that can be treated as a corporation (LLC or Corporation) by the Internal Revenue Service (IRS) can use the form to opt for taxation as an S Corporation (S Corp). We recommend that you use ZenBusiness to start your S-Corporation. The second section of IRS Form 2553 requires a business to provide information and evidence about its tax year if it is not operating for tax reporting purposes during the calendar year. The company must justify its tax year as part of the declaration (p.B. seasonality of the product). Form 2553, elected by a small corporation, is an Internal Revenue Service form that can be filed by a corporation to choose to register as an S Corporation rather than as a C Corporation. Part III applies only to qualifying trusts in subchapter S. Most small business owners will not fill in any of the information in this part.
IRS Form 2553 Description: A corporation or other entity that is eligible to be treated as a corporation submits this form to make an election under Section 1362(a) to be an S corporation. Form 2553 is a federal form that relates to federal income tax and S-company status, so there are no different requirements between states for Form 2553 other than the address or fax number to which you send the document. The first part of Form 2553 includes the name and address of your business, the date of incorporation and the taxation year. The first section of Form 2553 asks for identifying information such as the name, address, and identification number of the company`s employer. An employer identification number (also known as an AN), similar to a social security number, is a unique set of numbers used to identify a company for tax purposes and prove its identity. Specific instructions for filing Form 2553 are listed on the Internal Revenue Service website. The form is divided into 4 sections for those who choose S Corporation. Form 2553 is the Company S Choice Document that a business entity must file with the IRS to choose direct taxation.
The passing-on tax indicates that a company does not pay taxes. Alternatively, the owners/shareholders of this company are taxed on the profits and losses of the company through their personal income tax return. It is important to note that S-companies are not “tax-exempt organizations.” This classification is reserved for nonprofits designated as such under Section 501(c) of U.S. federal law, including charities, churches, and veterans` groups. The second part can be difficult. We recommend that you read the “Specific Instructions” section of the IRS instructions on Form 2553 and consult with an accountant for any other questions or concerns. For a business entity to qualify as an S corporation with respect to its annual taxes, it must file Form 2553 no later than the 15th day of the 3rd month following the beginning of its taxation year. Often, a company`s taxation year is the same as the calendar year (January – December).
However, if a business uses another fiscal year (p.B July to June), it is a fiscal year. Thus, the deadline for Form 2553 is not a specific calendar date for all businesses, but is based on the single tax year. Start by accessing form 2553 PDF on the IRS website. For help, see the “Specific Instructions” section of the IRS Instructions on Form 2553. The choice of S-Corp allows a business owner to pay the profits of an LLC in the form of wages and distributions to owner-employees. The IRS then applies FICA and income tax only to salaries, and distributions are subject only to income tax. If the LLC does not make enough profit to cover a reasonable salary and distribution, it does not make financial sense to choose the S-Corp tax classification. And if LLC owners want to give up a salary for any reason, they can be fined by the IRS. Where you send Form 2553 depends on the state of your business, office or primary agency. Many small businesses choose to start to take advantage of the multiple benefits that this legal deposit can bring, including limited personal liability, increased credibility, and tax benefits.
For business owners in the U.S. who are considering an S-Corporation classification, it is necessary to file Form 2553 in the U.S. . . .