- Election analysisWhether S status saves money for your business, after payroll costs, state taxes and the QBI deduction.
- Form 2553Filed on time, or with late-election relief if the deadline was missed.
- Reasonable compensationA salary you can defend, with documentation.
- Returns & payrollForm 1120-S, K-1s, owner payroll and the state filings that go with them.
Timing the election
To be effective for a given year, Form 2553 generally must be filed no later than two months and 15 days after the beginning of that tax year (March 15 for a calendar-year business). Missed it? The IRS offers simplified late-election relief in many cases.
New Jersey and New York
- New Jersey now generally treats federal S corporations as New Jersey S corporations automatically, with an opt-out.
- New York requires a separate state election (Form CT-6). New York City doesn't recognize S status for its corporate tax.
- Pass-through entity taxes in both states (New Jersey's BAIT and New York's PTET) can reduce federal tax for many owners.
Reasonable compensation
S corporation owners who work in the business must pay themselves a reasonable salary through payroll. Too low invites IRS reclassification; too high gives away the savings. Read our article on how much to pay yourself.
Frequently asked questions
At what profit level does an S corporation make sense?
There's no single number. It depends on what a reasonable salary is for your role, your state taxes, payroll costs and your QBI deduction. We model it for your actual numbers.
Can my LLC be an S corporation?
Yes. An LLC can elect to be taxed as an S corporation while remaining an LLC under state law.
I missed the Form 2553 deadline. Is it too late?
Often not. The IRS provides simplified relief for late S elections in many situations.
Do I have to be on payroll?
Yes, if you work in the business. Owner-employees must receive reasonable wages through payroll.