Why would you want to change the status of your business?
If you have an S corp and the size of your company has increased to where you want to have more than 100 investors, or you want to add another class of stock, you’ll need to change to a C corp before implementing those additions. This alteration requires filing a written statement of revocation of S corp status with the IRS.
If your business is a C corp, but meets all the requirements for S corp status, it may be beneficial – especially in terms of taxes – to become an S corp. Changing from a C corp to an S corp requires that the business meet certain criteria, have consent of the current shareholders, as well as complete and submit Form 2553 to the IRS on or before the 15th day of the 3rd month of the corporation’s tax year.
Even if your company is already established, a review of your business could ensure that you have the appropriate, and most advantageous, corporation status to realize savings now and in the future.
Further resources for understanding C corps and S corps:
