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The S corporation election is made on Form
2553. It is effective for the current tax year if filed before the
16th day of the third month of the tax year. If filed later, the
election will become effective for the following tax year. Filling
Form 2553 does not automatically bestow S corporation status; the IRS
must approve the S corporation election. The IRS approval should
be kept with the corporation's permanent records for as long as the
corporation is in business. To qualify for S corporation status, a
corporation must meet all of the following
requirements;
- It must be a domestic corporation that
is either organized in the
United States or organized under federal or state
law.
- It must have only one class of
stock.
- It must have no more than seventy-five
shareholders.
- It must have as shareholders only individuals, estates and certain
trusts. Partnership and corporations cannot be shareholders.
- It must have no nonresident alien shareholders.
If an electing S corporation wishes to have a year end other that
December 31st, the request is made on Form 2553, Part II. If an
existing S corporation chooses to change its tax year, the request is
made on Form 1128, Application to Adopt, Change, or Retain a Tax
Year. A required payment must be made if a corporation selects a
fiscal year end that does not have a substantial business purpose.
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