Filing S-Corp Status on a New Delaware Corporation
Delaware Corporate Law structure allows for the formation of three different types of for-profit corporations: General Corporation, Close Corporation and Public Benefit Corporation (called a Benefit Corporation in the other states in which it is a legal entity).
For federal tax purposes, a qualifying corporation may elect S-Corporation status; otherwise, a corporation is generally taxed under Subchapter C.
What is S-Corp Status?
A company with Subchapter S tax status, also known as an S corporation or an S-Corp, is a very popular tax status for small, newly formed corporations. Subchapter S of the tax code was first enacted in 1958 and has been used by countless entrepreneurs with great success.
Subchapter S tax status allows for a unique taxation method where the tax liability for the profits and losses flows through the company to the shareholders in their pro rata share. The shareholders are then responsible for the taxes at their personal tax rate. This pass-through rule eliminates the double taxation issue related to the C corporation.
Delaware S-Corp status may benefit some companies by allowing eligible losses to pass through to shareholders. However, there are also tax rules and limitations on which companies can take advantage of the Subchapter S tax status.
Get answers for all your business needs
Not sure what’s right for your company? Speak directly with our specialists and get clarity before you make your next move.
Talk to an expert
Delaware S-Corp Filing Requirements
Before a Delaware corporation can elect S-Corp tax status, it must meet certain IRS eligibility requirements. These requirements primarily relate to the corporation’s ownership structure. To qualify for S-Corp status, a Delaware corporation generally must meet the following requirements:
- The corporation must have only one class of stock
- All shareholders in the corporation must be U.S. Citizens or Residents (partnerships, corporations, and nonresident aliens generally cannot be shareholders)
- There cannot be more than 100 shareholders
- All shareholders must agree to the election of the S-corp tax status.
- The corporation cannot be ineligible under IRS rules
How to Apply for the Subchapter S Tax Status
- Form a Delaware Corporation
Before electing S-Corp tax status, you must first establish your corporation. Harvard Business Services, Inc. can help you form a corporation or other type of business entity in any state. We can also serve as your Registered Agent, working with you to help remain compliant for the life of your company. - Confirm Eligibility for S-Corp Status
Before making the election, confirm that your corporation meets the IRS requirements for S-Corp status. These requirements (listed in the previous section) state that the corporation generally cannot have more than 100 shareholders, must have only allowable shareholders, and can have only one class of stock. - Complete IRS Form 2553
To elect S-Corp status, complete IRS Form 2553, Election by a Small Business Corporation. The form requests information about the corporation, including its legal name, address, EIN, state and date of incorporation, selected tax year, and the date the S-Corp election will become effective. You will also need to provide information about each shareholder. - Obtain Shareholder Consent
The corporation's shareholders should consent to the S-Corp election earlier in the process, but now each shareholder will need to sign the shareholder consent statement on Form 2553. - File Form 2553 with the IRS
Once Form 2553 is complete and the required shareholder consents have been obtained, submit the form to the IRS. In general, Form 2553 must be filed no more than two months and 15 days after the beginning of the tax year in which the S-Corp election is intended to take effect, or at any time during the preceding tax year. If the deadline is missed, the IRS may provide late-election relief in certain circumstances.Form 2553 can generally be submitted to the IRS by mail or fax. The mailing address and fax number will depend on the location of the corporation’s principal business, office, or agency. Please refer to the IRS’s current Where to File Form 2553 instructions before submitting the form.
Maintaining S-Corp Status
Once the IRS approves your S-Corp status, the corporation still needs to meet S-Corp eligibility requirements. This includes maintaining an eligible ownership structure, having no more than 100 shareholders, and generally maintaining only one class of stock. At the same time, a Delaware corporation will also need to keep up with its state obligations. Failing to maintain S-Corp eligibility could result in termination of the corporation’s S-Corp tax status.
Feel free to reach out to one of our business formation specialists at Harvard Business Services, Inc. with any questions about S-Corps and how to apply for Subchapter S tax status.
Get answers for all your business needs
Not sure what’s right for your company? Speak directly with our specialists and get clarity before you make your next move.
Talk to an expert*Disclaimer*: Harvard Business Services, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, Harvard Business Services, Inc. is not responsible for and makes no representations regarding such source’s content or accuracy. Opinions expressed in this article do not necessarily reflect those of Harvard Business Services, Inc.
More By Brett Melson
![]()
Email this article to a friend
There are 2 comments left for Delaware S-Corp Filing Requirements: How to Apply for an S-Corp Status
Parviz Kazi said: Friday, December 8, 2017If I have a Delaware LLC and I am doing business in New York, Can I file Form CT-6 to be treated as a New York S Corporation?
HBS Staff replied: Monday, December 11, 2017Unfortunately, this question is outside the realm of our experience forming Delaware companies. We suggest you contact an accountant in order to best answer your query. Thanks for reading our blog.
David Whitehurst said: Tuesday, July 18, 2017Please assist me with questions on receiving S-Corporation status as I am not certain whether the corporation has C or S status with the IRS. However, I have completed the taxes with the IRS as an S-Corporation. Our Corp name is Faith Christian Center, Inc.
HBS Staff replied: Thursday, July 20, 2017It would be best for you to inquire with your tax professional or the IRS to find out if your entity has S corporation tax status. You can reach the IRS at 1-800-829-4933.