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That is a very common mistake. When you incorporate as an entity, the default will be a C-corp. In order to have and S-corp an election for small business status should be made by filing form 2553. The best scenario is to file the incorporation and Form 2553 all at the same time to avoid any problems.
However, this does not seam to be your scenario. You can use what is called rev-proc to make a late S-election up to two years after incorporating. After the two years the IRS is very unforgiving that you forgot to make the election that far back.
If you have recently incorporated then you can just file the Form 2553.
Remember when you file the Form 2553 and/or make the late election to consider if you are in a community property state or not. There are only 5. If you are a community property state make sure the spouse also signs the Form 2553. You do not have to assign any share but must account for them.
Also watch for any state ramification on making the S-Election. It will usually require a state return during tax time as well.
This answers your initial question but you may have more after reading this post. Please let me know if I can assist you further.
My telephone number is (817) 481-3784. Email firstname.lastname@example.org. Or just reply back to this post.
Thanks and much luck.
Eligibility Criteria for S-CorporationsA corporation may choose to be taxed as an S-Corporation if it meets the following criteria.
- The company 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 is not timely filed, see Rev. Proc. 2004-48, 2004-32 I.R.B. 172.
- The company has no more than 100 shareholders. (A husband and wife and their estates are treated as one shareholder for this test. A member of a family can choose to treat all members of the family as one shareholder for this test. All other persons are treated as separate shareholders.)
- The only shareholders are individuals, estates, certain exempt organizations, or certain trusts.
- The company has no nonresident alien shareholders. (That is, the only shareholders are US citizens and resident aliens.)
- The company has only one class of stock. 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.
- It is not one of the following ineligible corporations:
- A bank or thrift institution that uses the reserve method of accounting for bad debts under section 585.
- An insurance company subject to tax under subchapter L of the Code.
- A corporation that has elected to be treated as a possessions corporation under section 936.
- A domestic international sales corporation (DISC) or former DISC.
- It has or will adopt or change to one of the following tax years.
- A tax year ending December 31.
- A natural business year.
- An ownership tax year.
- A tax year elected under section 444.
- A 52-53-week tax year ending with reference to a year listed above.
- Any other tax year (including a 52-53-week tax year) for which the corporation establishes a business purpose.
- Each shareholder consents to the S-Corporation election.
My big concerns are #s 3, 4, 5 and 8 above.