S Corporation Election
A tax election, not a business structure
An S corporation is not a type of company you form. It is a federal tax status that an eligible LLC or corporation elects. This course explains how the election changes your tax picture, who qualifies, how to file, and what it obliges you to do afterwards.
Quick answers
Do I form an S corporation?
No. You form an LLC or a corporation with a state, then elect S corporation tax treatment with the IRS on Form 2553 if you qualify.
What does the election change?
Profit passes through to owners, and owner-employees take a reasonable salary through payroll with the remaining profit distributed without self-employment tax.
Who cannot elect it?
Generally companies with non-resident alien shareholders, more than 100 shareholders, ineligible shareholder types such as most corporations and partnerships, or more than one class of stock.
Is it always worth it?
No. Payroll, extra returns and accounting cost money. The election usually only pays off once profit consistently exceeds a reasonable salary by a meaningful margin.
Course lessons
- 1What S corporation status meansA Subchapter S election sitting on top of an existing entity.
- 2Who qualifies for the electionThe eligibility rules, in plain terms.
- 3LLC taxation vs S corporation taxationWhere the saving comes from, and where it disappears.
- 4C corporation taxation vs S corporation taxationOne layer of tax or two, and why that is not the whole story.
- 5Form 2553 and election timingHow and when to file the election.
- 6Reasonable compensationThe rule that decides whether the election survives scrutiny.
- 7Payroll and running the election properlyThe operational work the election creates.
- 8Tax filings after the electionWhat the company and its owners file each year.
- 9State-level differencesThe election does not work the same way in every state.
- 10Common mistakes and when to get adviceThe errors that cost money or terminate the election.
- 11When the election makes senseRunning the numbers before you file.
Not sure whether the election fits?
The numbers depend on your profit, your role in the business and your state. Gullia Filing's tax team reviews your position, prepares Form 2553 where it makes sense, and sets up payroll so the election holds up.
Official sources
Last reviewed: September 2026