S-Corporation Election Package (Form 2553 + Georgia S-Election)

S-CORPORATION ELECTION PACKAGE — GEORGIA

OVERVIEW

This package guides a Georgia corporation (or a Georgia LLC electing corporate treatment) through electing federal S-corporation status on IRS Form 2553 and satisfying the Georgia state overlay. An S election causes income, losses, deductions, and credits to pass through to shareholders, avoiding entity-level federal income tax under Subchapter S (26 U.S.C. §§ 1361–1379).

Georgia in one line: Georgia recognizes the federal S election automatically — no separate state election is required — but the S corporation files Form 600S, and nonresident shareholders must execute a consent agreement (Form 600S-CA) or the corporation is taxed at the entity level on the nonresidents' shares. An optional pass-through entity (PTE) election is available under O.C.G.A. § 48-7-21.

Package Contents

1. Part 1 — Federal Eligibility Checklist (IRC § 1361)
2. Part 2 — Form 2553 Line-by-Line Guide
3. Part 3 — Shareholder Consent Statement
4. Part 4 — Entity Interplay (LLC / Form 8832)
5. Part 5 — Georgia State Overlay
6. Part 6 — Post-Election Compliance
7. Part 7 — Revocation
8. Fillable Field Summary
9. Sources & References

PART 1 — FEDERAL ELIGIBILITY CHECKLIST (IRC § 1361)

An entity may elect S status only if every requirement below is satisfied on the effective date and continuously thereafter. A single violation terminates the election (26 U.S.C. § 1362(d)(2)).

Entity Requirements — 26 U.S.C. § 1361(b)(1)

☐ The entity is a domestic corporation or a domestic eligible entity (LLC) that will be treated as a corporation
☐ The entity has no more than 100 shareholders (family members may be counted as one — § 1361(c)(1))
☐ The entity has only one class of stock (differences in voting rights alone are permitted — § 1361(c)(4))
☐ The entity is not an ineligible corporation (no financial institution using the § 585 reserve method; no insurance company under Subchapter L; no § 936 possessions-credit corporation; no current/former DISC)

Shareholder Requirements — 26 U.S.C. § 1361(b)(1)(B)–(C)

☐ All shareholders are eligible: individuals, estates, certain trusts, or qualifying tax-exempt organizations
☐ No shareholder is a partnership, a corporation, or a nonresident alien (§ 1361(b)(1)(B)–(C))
☐ Any trust shareholder is a permitted type only: grantor trust, testamentary trust (2-year limit), voting trust, QSST, or ESBT (§ 1361(c)(2), (d), (e))
☐ Each shareholder's consent is documented (all shareholders must consent — § 1362(a)(2))

PART 2 — IRS FORM 2553 LINE-BY-LINE GUIDE

Timing — 26 U.S.C. § 1362(b)

☐ Standard deadline: file no later than 2 months and 15 days after the beginning of the tax year the election is to take effect (i.e., by the 15th day of the 3rd month)
☐ Alternative: file at any time during the tax year preceding the year the election is to take effect
☐ New entity: the 2-month-and-15-day clock starts on the earliest of (a) first issuance of stock, (b) first having assets, or (c) first doing business

Part I — Election Information

Part II — Fiscal Tax Year (if a non-calendar year is requested)

☐ Complete Part II only if Box F selects a fiscal year — state the business-purpose or § 444 basis
☐ Most S corporations adopt a calendar year; a § 444 election may require a required payment (Form 8752)

Late Election Relief — Rev. Proc. 2013-30

If the deadline has passed, relief may be available when filed within 3 years and 75 days of the intended effective date:

☐ Write "FILED PURSUANT TO REV. PROC. 2013-30" across the top of Form 2553
☐ The entity intended to be an S corporation as of the intended effective date
☐ Failure to qualify was solely because Form 2553 was not timely filed
☐ Reasonable cause statement attached, signed under penalties of perjury
☐ All required returns are consistent with S status (or none were due)
☐ All shareholders from the effective date forward report consistently with S status

PART 3 — SHAREHOLDER CONSENT STATEMENT

Under 26 U.S.C. § 1362(a)(2), all shareholders on the day of the election must consent. The consent is incorporated in column K of Form 2553; the table below documents it.

Consent language: Each shareholder, by signing above, consents to the corporation's election under 26 U.S.C. § 1362(a) to be treated as an S corporation and represents that the information stated is true and correct.

Community property note: in a community-property context, the consenting spouse who has a community interest in the stock must also consent (Treas. Reg. § 1.1362-6(b)(2)). Georgia is not a community-property state; this generally affects only shareholders who hold the stock as community property under another state's law.

PART 4 — ENTITY INTERPLAY (LLC / FORM 8832)

☐ Corporation electing S status: a domestic corporation files only Form 2553 — no Form 8832 is required
☐ LLC electing S status: an LLC that has not elected corporate treatment may file Form 2553 alone; a timely, valid Form 2553 is treated as a deemed entity-classification election (Form 8832) to be taxed as a corporation, effective the same date (Treas. Reg. § 301.7701-3(c)(1)(v)(C))
☐ LLC already taxed as a C corporation (prior Form 8832): file Form 2553 only
☐ Confirm the Georgia LLC is in good standing with the Georgia Secretary of State before filing
☐ Confirm the entity's governing documents (operating agreement / bylaws) do not create a prohibited second class of stock (e.g., disproportionate distribution/liquidation rights)

PART 5 — GEORGIA STATE OVERLAY (KEY SECTION)

S-Corp Recognition

☐ Georgia automatically recognizes a corporation's valid federal S election — no separate Georgia S election form is required. Attach the IRS acceptance letter (CP261) and a copy of Form 2553 to the first Georgia return.

Return Form

☐ File Georgia Form 600S — S Corporation Tax Return annually (and provide each shareholder a Georgia Schedule K-1)
☐ Due on or before the 15th day of the 3rd month following the close of the tax year (calendar-year: March 15), tracking the federal Form 1120-S deadline

CRITICAL — Nonresident Shareholder Consent (Form 600S-CA)

☐ Each nonresident shareholder must execute Form 600S-CA, "Consent Agreement of Nonresident Shareholders of S Corporations," agreeing to file a Georgia return and pay Georgia tax on the Georgia-source portion of their pro-rata share
☐ If a nonresident shareholder does NOT sign Form 600S-CA, Georgia does not recognize the federal S treatment as to that shareholder's share, and the S corporation is taxed at the entity level (at the corporate rate) on that nonresident's portion of Georgia taxable income
☐ Alternatively, the corporation may file a composite return and pay the tax on behalf of consenting nonresident owners

Optional — Pass-Through Entity (PTE) Election

☐ For tax years beginning on or after January 1, 2022, an eligible S corporation may make an annual, irrevocable election to pay Georgia income tax at the entity level at the flat rate (currently 5.75%) under O.C.G.A. § 48-7-21 (the parallel partnership provision is § 48-7-23); see Ga. Comp. R. & Regs. R. 560-7-3-.03
☐ The election is made by checking the box and completing the applicable schedule on Form 600S by the original or extended due date
☐ The PTE election is available only if the entity is 100% directly owned by persons eligible to be S-corporation shareholders under IRC § 1361
☐ If the PTE election is made, it is binding on all owners, nonresident owners are not taxed on the allocated/apportioned income, and a composite return should NOT be filed
☐ Electing entities must make estimated payments in the same manner as a C corporation (Form 602-ES / Georgia Tax Center)

Georgia Entity-Level Tax — Summary

PART 6 — POST-ELECTION COMPLIANCE

IRS Confirmation

☐ Expect IRS acceptance notice CP261 (or denial) within ~60 days; if none, call IRS Business & Specialty Tax Line (800) 829-4933
☐ Retain the CP261 permanently with corporate records

Reasonable Compensation

☐ Pay shareholder-employees reasonable compensation as W-2 wages before non-wage distributions (IRS scrutinizes under-compensation that recharacterizes wages as distributions to avoid FICA)
☐ Document the basis for compensation (duties, time, comparable salaries)

Built-In Gains Tax — 26 U.S.C. § 1374

☐ If the corporation converted from C to S, a corporate-level built-in gains (BIG) tax applies to net recognized built-in gain on appreciated assets disposed of during the 5-year recognition period; track each asset's basis and fair market value as of the conversion date

Excess Net Passive Income Tax — 26 U.S.C. § 1375

☐ If the corporation has accumulated C-corporation E&P and passive investment income exceeds 25% of gross receipts, a corporate-level tax applies; if this persists for 3 consecutive years, the S election terminates under § 1362(d)(3)

Ongoing Filings

☐ File federal Form 1120-S and issue Schedule K-1 to each shareholder annually
☐ File Georgia Form 600S and Georgia Schedule K-1 annually; maintain Form 600S-CA for each nonresident shareholder (or composite/PTE filing)
☐ Maintain a single class of stock and continuous shareholder eligibility

PART 7 — REVOCATION (26 U.S.C. § 1362(d)(1))

☐ Voluntary revocation requires consent of shareholders holding more than 50% of the issued and outstanding shares (voting and nonvoting) on the date of revocation
☐ File a revocation statement with the IRS service center where Form 2553 was filed (no official form; use a statement that the corporation revokes its § 1362(a) election, listing the EIN, number of shares outstanding, and the intended effective date)
☐ Attach a statement of consent signed by the consenting shareholders
☐ Effective date: if filed on or before the 15th day of the 3rd month of the tax year, effective the first day of that year; otherwise effective the first day of the following tax year (a prospective date may also be specified)
☐ After revocation/termination, a 5-year waiting period applies before re-electing without IRS consent (§ 1362(g))
☐ Georgia status follows the federal treatment; notify the Georgia Department of Revenue and resume filing Georgia Form 600 (C-corporation return) as applicable

FILLABLE FIELD SUMMARY

SOURCES & REFERENCES

• 26 U.S.C. §§ 1361–1379 (Subchapter S)
• 26 U.S.C. § 1362 (election, revocation, termination); § 1374 (built-in gains); § 1375 (excess net passive income)
• IRS Form 2553 and Instructions (Rev. 12/2020 or later); IRS Form 8832 (entity classification)
• Treas. Reg. § 301.7701-3(c)(1)(v)(C) (deemed Form 8832 from a timely Form 2553); Treas. Reg. § 1.1362-6 (election procedures)
• Rev. Proc. 2013-30 (late election relief)
• O.C.G.A. § 48-7-21 (corporate tax; entity-level PTE election); O.C.G.A. § 48-7-23 (pass-through entity election)
• Ga. Comp. R. & Regs. R. 560-7-3-.03 (Election to Pay Tax at the Pass-Through Entity Level)
• Georgia Department of Revenue — HB 149 Pass-Through Entity Tax FAQ; Form 600S; Form 600S-CA (Consent Agreement of Nonresident Shareholders)