How to Convert to S Corp

Once you have set up a corporation, a C corporation to be precise, you can convert it to an S Corp. All you need to know if how to convert to S Corp from a C Corporation. Once the C corp is converted to an S corp, the corporation becomes a pass through business entity. The process of converting from a C corp to an S corp is called electing S corporation tax status. Converting the corporation from a C corporation to an S corporation has immense implication on how the corporation is taxes. The corporation will no longer pay corporate taxes. Profits and losses are passed to shareholders who must report them on their individual income tax returns.

Requirements before converting from a C corporation to an S corporation

Before a corporation can convert to an S corporation, the C corporation must meet certain requirements to be classified as an S corporation. For example, the C corporation must only have one class of stock for it to be classified as an S corp. Preferred stocks are not allowed in an S corp. For more rules of how to convert to S corp requirements, see S corporation section.

Converting a C corporation to an S corporation - how to convert to S corp?

To convert a C corp to an S corp, file the IRS tax form 2553 called the Election by a Small Business Corporation.

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