Pay yourself smarter, once you're profitable.
The S-corp election changes how the IRS taxes the LLC or corporation you already have. Once profit is steady, you take part of your income as a reasonable salary and the rest as distributions, which are not hit by self-employment tax. We prepare Form 2553, collect every owner's signature, and file it, on time or under late-election relief if the deadline slipped.
The business is profitable now. And the tax bill shows it.
For a while, break-even made taxes simple. Now the LLC is throwing off real profit, and by default every dollar of it runs through self-employment tax on top of income tax. That is the point where a lot of owners first hear the words "S-corp" from an accountant. It is not a new company and it is not for everyone, but for a profitable owner who pays themselves, it can change the math.
So how does an S-corp actually lower that? It changes how you pay yourself.
Split your income into salary and distributions.
An S-corp election tells the IRS to tax your business under Subchapter S. Instead of all profit being treated as self-employment income, you pay yourself a reasonable salary through payroll, which is taxed normally, and take the remaining profit as distributions, which are not subject to self-employment tax. The larger and steadier your profit, the more that split can save, which is exactly why it helps some owners and does nothing for others.
- Net profit is steady and comfortably above a reasonable salary for your role.
- You take a regular income from the business rather than reinvesting all of it.
- The savings clear the added cost of running payroll and a second tax return.
- Profit is in the five figures and climbing, where the self-employment tax saved adds up.
- Profit is thin or seasonal and would be eaten by payroll and filing costs.
- You reinvest nearly everything back into the business.
- You plan to raise venture capital, where investors expect a C-corporation.
- You could not defend a reasonable salary, which the IRS requires before any distributions.
The number the whole thing rests on: your reasonable salary. The IRS requires an S-corp owner-employee to pay themselves what a comparable business would pay for the same work before taking distributions. Set it too low to dodge tax and you invite an audit and reclassification; set it sensibly and the distributions are legitimately free of self-employment tax. It is also a tax election, not a conversion: a single-member LLC can elect S-corp treatment and stay an LLC. None of this is tax advice, so we model it against your actual numbers before you commit.
If the math works, timing is the next trap. Here's the deadline.
The election runs on a clock, not a calendar year.
Form 2553 has to reach the IRS within a specific window, and missing it usually costs you the whole year. Here is how the timing actually works, and the door that stays open if you were late.
Start of the tax year
The window opens at the beginning of the tax year you want the election to take effect, or at formation for a brand-new entity electing right away.
Two months and 15 days to file
You have two months and fifteen days from the start of that tax year, roughly mid-March for a calendar-year business, to file Form 2553 for the current year.
Form 2553 prepared and signed
We prepare the 2553 for your entity and collect the required consent from every owner, then submit it to the IRS. All shareholders have to sign, which is where do-it-yourself filings often stall.
Acceptance letter, CP261
The IRS confirms the election with a CP261 notice. We store it in your vault, since your accountant and your payroll provider will both ask to see it.
Up to 3 years and 75 days later
Under IRS Revenue Procedure 2013-30, a late election can still be accepted within three years and seventy-five days of the intended effective date, if you meet the conditions. We file the relief with a reasonable-cause statement.
On time or late, the filing itself is the same handoff. Here it is.
You share the numbers. We file the election.
Four moves take you from a default LLC to an accepted S-corp. You confirm it makes sense; we prepare and file the form.
Check the math
We run your profit and pay against the cost of payroll and a second return, so you elect only if it actually saves.
Complete Form 2553
We fill the 2553 for your entity, including the effective date and, if needed, the late-election attachment.
Collect owner consent
Every shareholder or member has to consent. We gather each signature so the election is not rejected as incomplete.
Submit and track
We file with the IRS and track it to the CP261 acceptance, then store the confirmation for payroll and taxes.
Whether you are early or already late, there's a path for both.
File before the deadline, or recover a missed one.
Filed inside the window
- Form 2553 specialist-prepared
- Shareholder consent collected
- Filed to the IRS and tracked
- CP261 confirmation in your vault
Recover a missed year
- Everything in the on-time filing
- Form 2553 with late-election attachment
- Reasonable-cause statement drafted
- IRS submission, tracking, and a backup plan
The IRS does not charge to file Form 2553; our fee is for preparing it correctly. See what the election costs →
Filed and accepted. Here's what changes the day it clears.
The election clears, and payday changes.
Once the IRS accepts the election, your business is taxed as an S-corp from the effective date. You put yourself on payroll at a reasonable salary, take the rest as distributions, and file an 1120-S each year. It is a real change in how the company runs, which is why we hand you the confirmation and line up the pieces that come with it.
Rivera Studio, LLC
Form 2553 filed with the IRS. Owner consent collected and the effective date set before submission.
Jordan's studio crossed the line.
Two profitable years in, the self-employment tax was the biggest line on the return. We modeled it, set a defensible salary, filed the 2553, and put the studio on payroll. The distributions above that salary stopped carrying self-employment tax, and the savings covered the payroll service several times over.
What an S-corp needs running alongside it.
Payroll
An S-corp owner has to be on payroll. This is the salary the whole election depends on.
Learn more →Bookkeeping
Clean books to separate salary from distributions and support the numbers.
Learn more →Tax Preparation
An S-corp files its own 1120-S return each year. We can prepare it.
Learn more →Compliance Calendar
Payroll filings and the 1120-S add deadlines. Keep them all in one place.
Learn more →One decision, made well. Here's the whole road it sits on.
An S-election is a tuning step, not the whole engine.
It is one optimization on a much longer road. Everything before and after it, from formation to the eventual exit, already lives on one platform, so refining how you are taxed never means starting over somewhere new.
Form it, run it, and tune how it is taxed as it grows, all inside File.Business. One platform for the whole life of the company, from the first filing to the last.
The questions owners ask before they elect.
What is the S-corp election deadline?
For an existing entity, generally within two months and fifteen days after the start of the tax year you want it to take effect, which is about mid-March for a calendar-year business. A new entity has the same window measured from formation. Miss it and you usually wait until next year, unless you qualify for late-election relief. We file inside the window so timing is not what costs you the savings.
What does an S-corp actually save?
It reduces self-employment tax. Instead of all profit being subject to that tax, you pay yourself a reasonable salary and take the rest as distributions that avoid it. The saving grows with profit, which is why it only pays off above a certain income, once the added payroll and filing costs are covered. This is general information, not tax advice, so we model it against your actual numbers before you elect.
When does an S-corp election make sense?
Typically once net profit is high enough that the self-employment tax saved outweighs the added payroll service and a second tax return, often in the low-to-mid five figures of profit and up. It fits an owner taking a steady income, not a business reinvesting everything or planning a venture raise. We run the threshold for your situation before you elect rather than after, so the decision is based on your numbers.
What is a reasonable salary, and why does it matter?
The IRS requires an S-corp owner-employee to pay themselves a reasonable wage, what a comparable business would pay for the same work, before taking any distributions. Set it too low to dodge tax and you invite an audit and reclassification; set it sensibly and the distributions are legitimately free of self-employment tax. Getting this number right is the core of running an S-corp correctly, and we help you support it.
Can a single-member LLC be an S-corp?
Yes. A single-member LLC can elect S-corp taxation while staying an LLC; you do not convert to a corporation. The owner becomes an employee paid a reasonable salary, with the rest taken as distributions. It is one of the most common setups for a profitable solo business, and we handle the election without changing your underlying entity type.
I missed the deadline. Can I still elect?
Often, yes. Under IRS Revenue Procedure 2013-30, a late election can be accepted within three years and seventy-five days of the intended effective date, if the entity meant to elect on time, has been treated as an S-corp by all parties, and can show reasonable cause. We file late-election relief with a reasonable-cause statement regularly, so a missed March deadline does not automatically cost you the year.
Does electing S-corp change my LLC or corporation?
No. The S-corp election only changes how the business is taxed, not what it legally is. Your LLC stays an LLC and your corporation stays a corporation; the entity, its name, and its EIN are unchanged. What changes is the tax treatment and the obligations that come with it, such as running payroll and filing an 1120-S.
What new obligations come with an S-corp?
Three main ones: you have to run payroll for your reasonable salary, file a separate 1120-S return each year, and keep clean books that separate salary from distributions. They are the reason the election does not fit every business, and the reason we line up payroll, bookkeeping, and a compliance calendar alongside the filing so the savings are not eaten by a missed deadline.