July 3, 2025
The election to be taxed as an S corporation represents a pivotal strategic decision for an eligible business. It is not merely a procedural tax filing but a fundamental shift in the entity's tax reality, governed by Subchapter S of the Internal Revenue Code. This election is formally made by filing IRS Form 2553, "Election by a Small Business Corporation," which serves as the exclusive instrument for this purpose. It is crucial to understand that this is a change in tax classification only; the underlying legal structure of the business, such as a Limited Liability Company (LLC) or a C corporation, remains unchanged under state law.Β
Navigating the complexities of the S corporation election is not a task for the uninitiated. The intricate interplay between state corporate law (requiring resolutions and formalities) and federal tax law (requiring a specific election form and adherence to strict eligibility rules) creates numerous potential pitfalls.Β
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