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 Understanding Revocation and Re-Election of S Corporation Status 

 When it comes to running a small business, understanding the rules and regulations surrounding taxation can be a challenge. One of the most important things to understand is your business’s corporate status. This is especially true if you are an S corporation—a type of corporation that allows income to pass through to the shareholders and be taxed at individual rates. But what happens if you want to revoke or re-elect S corp status? Here’s what you need to know. 

Revoking S Corp Status 

If your business has previously elected S corp status, you may decide at some point that it no longer suits your needs. In this case, you can choose to revoke your company’s S corp status by filing Form 2553 with the IRS. Once you do so, your business will become a C corporation. It’s important to note that revoking your company’s election does not change its legal structure; it only changes how the profits are taxed. 

Re-Electing S Corp Status 

If you have decided that revoking your company’s election was a mistake, don’t worry—you can always re-elect S corp status. To do so, you must file Form 2553 within two months and 15 days of the beginning of the tax year for which you are making the election. However, keep in mind that once your company becomes an S corp again, it will be subject to all the same requirements as when it initially elected S corp status—including filing Form 1120S each year and holding annual shareholder meetings. 

Making sure that your small business is operating according to all relevant laws and regulations is critical for success. If you are an S corporation, understanding how revocation and re-election work is key if you ever decide to make any changes regarding taxation status in future years. Although there are certain steps required for both processes, taking these steps ensures that everything runs smoothly when making important decisions about taxes for your business.   By following these steps carefully, small business owners can make sure their businesses remain on track for success in the long term!

Remember to consult with one of our tax-accountant specialists for all your tax and accounting needs at 1-888-455-3111 or visit our contact page at www.ataxdefense.com