Form 2553 - USA

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Form 2553 - USA

What is a Form 2553?

Form 2553, as per section 1362 US Law IRS, is there for small business entities and LLCs Limited Liability Companies to select to be “S Category Organizations” under this law section. Any organization or business concern selects themselves under 1362(a) to be an S Corporation, being a small business or LLC or like.

The form is used for electing the taxation category being an S corporation by the Organizations under this category as per said clause and sections of the US Law.

How to fill out form 2553?

Filling out form 2553 election by a small business corporation ensures an employer is eligible per the criteria mentioned for the S category organization by the US IRS.

The form has four parts to fill up. Let us see what those are and which information is needed to fill that:

Part I: Information regarding the election

This part contains basic information as appended below:

  • Company name
  • Organizational address
  • Employer identification number (EIN)
  • Date
  • State of incorporation
  • Financial year
  • List of shareholders along with their shares’ ownership status in terms of percentages 
  • The effective date of the election 
  • Shareholders’ signatures
  • Signature of your corporate official

Part II: Financial tax year selection                       

Part II of Form 2553 encompasses an employer’s tax purposes requirements filling up. Part II of this form is for filling up by hose employers which had in part I item F checked the box number 2 or 4, or have 52 or 53-week tax year not ending in December. It is advised that this part should be filled with the consultation of your tax consultant professional, as this is technical.

Part III: Election of the qualified subchapter S trust (QSST)

For the qualified subchapter S trust (QSST) employers, part III is for those specific. Such employers must elect such part in Part I, as Part III cannot be submitted except that.

Part IV: Election in terms of the late corporate classification representation

Part IV of this form is for the organizations for election in terms of the late corporate classification representation. This is helpful for the companies which as per the classification of the election intended to be effective on a similar date as of the late S corporation election intended to be effective, for their late submission representation for relief as per the US law, by the US Internal revenue service (IRS).

But that any reasonable cause for late election or late submission must be mentioned therein by the employer.

When Should I File Form 2553?

Small organizations must submit form 2553 with the US IRS for S-category company status registration consideration, this is made mandatory by United States law. 

Conditions which necessitate the company file form 2553:

This form must be filled and submitted within 2 months and 15 days after the start of the tax year, say March 15 for a tax year ending in December.

Form 2553 can be submitted any time in a previous tax year no later than the S category corporation is elected to take effect for the tax year. For example, if an employer is submitting to elect for S corporation status in the year 2023, in that case, form 2553 could be submitted anytime in the year 2022.

Moreover, small businesses may be able to file the late election after the due date of March 15 passes, but in certain cases, as mentioned below:

  • The small business organization had a plan for filling S corporation by the intended effective date
  • Form 2553 could not be submitted on time being the only reason for the failure of such a file
  • Small business has a reasonable cause to explain for late submission
  • The corporation has the document of proof of filling of all shareholders’ incomes in line with the intention of the company to opt for an S corporation

What are the eligibility requirements for an “S” Corporation?

The following are the eligibility requirements for an “S” Corporation:

  1. The company must be a domestic corporation
  2. No nonresident alien shareholder is allowed to be your shareholder
  3. Maximum 100 shareholders of the corporation
  4. The corporation must file form 2553 timely
  5. The corporation must not have more than one class of stock

The corporation shareholders in most cases are individuals, estates, and any exempt organization: but not a corporate entity.

Where to file form 2553?

Employers are advised to visit IRS official webpage for US IRS law concerning the eligibility criteria, (instructions for form 2553) and submission of form 2553 on the link.

After IRS form 2553 is submitted to the Internal Revenue Service (IRS), then the IRS issues the notification for whether the employer is accepted under the S corporation status or otherwise.

Disclaimer: The information here is merely rewritten in simple language as per the understanding of the author for the understanding purposes of the general public. And, hence it is not challengeable for any of the litigation processes worldwide or presentation(s) / representation(s) in any court of law whatsoever; etc. under any law(s), rule(s), regulation(s), policies, and under any circumstance(s) whatsoever, wherever, etc.

Hence, it is advised to visit the US IRS official website for updated / more accurate information, from time to time.