How to Convert a C Corporation to an S Corporation
A C corporation, also known as a regular corporation, forms when articles of incorporation get filed with the state where the business operates. An S corporation, also known as a Subchapter S corporation, begins when a C corporation files the appropriate form with the Internal Revenue Service. S corporations must adhere to certain rules and regulations, such as having 100 shareholders or less. Furthermore, S corporations cannot have shareholders that are other corporations, limited liability companies or partnerships. Individual shareholders of an S corporation must have U.S. citizenship or status as a resident alien.
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Instructions
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Acquire Form 2553 from the IRS. Print Form 2553 from the IRS website or call 800-TAX-FORM to have Form 2553 sent by mail.
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Complete Form 2553. Provide information about the company, such as the date when the company became incorporated, its federal employer identification number and a brief description of the company's business activities. Include the signature of every shareholder who participates in the business.
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Mail or Fax Form 2553 to the IRS. The IRS office where the company needs to fax or mail Form 2553 depends on the business's location.
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Call 800-829-4933 to follow up, if you have not received a notification letter from the IRS. A notification letter should be sent to your company within 60 days of mailing or faxing Form 2553 to the IRS.
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File the company's final tax return as a C corporation. The company has to file Form 1120 with the IRS by the due date or extended due date to avoid penalty. Submit Form 1120S to the IRS before the due date or before the date of the company's extension. Filing Form 1120S with the IRS for the first time finalizes the conversion process, as explained by the IRS website.
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