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Step 1
Incorporate. A Subchapter S corporation begins the same as any other corporation. Articles of incorporation and other necessary documents must be filed with a state according to its requirements. If you plan to elect for Subchapter S status, it's important to keep in mind certain restrictions, such as limitations on the number of shareholders, the exclusion of foreign shareholders, and the issuance of only one class of stock. For a full description of Subchapter S qualifications, see Instructions for Form 2553 in the Additional Resources section below.
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Step 2
Get Form 2553. Subchapter S status is officially obtained by election of the company's shareholders. This is done with IRS Form 2553 (Election by a Small Business Corporation), available directly from the IRS website (see Additional Resources). Use the Instructions for Form 2553 to complete the form.
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Step 3
File on time. The Election by a Small Business Corporation (Form 2553) must be submitted within 2 months and 15 days of the beginning of the tax year in which it's intended to take effect. Because Subchapter S corporations must use a December 31 year end (the same as individual taxpayers), the form must be submitted by March 15 to take effect in the current year. There is no filing fee for submitting Form 2553.
