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

S-CORPORATION ELECTION PACKAGE — MISSOURI

OVERVIEW

This package guides a qualifying corporation or LLC through electing federal S-corporation status on IRS Form 2553 under 26 U.S.C. § 1362(a), and addresses how that federal election interacts with Missouri tax law.

An S-corporation is a pass-through entity: income, losses, deductions, and credits flow through to shareholders, who report them on their individual returns. This avoids the federal entity-level "double taxation" that applies to C-corporations.

Missouri in one paragraph. Missouri recognizes the federal S-election and treats the entity as a pass-through. There is no separate Missouri S-election — an entity that files federal Form 1120-S files Missouri Form MO-1120S. Missouri provides for nonresident shareholder withholding (Form MO-1NR / MO-2NR) with a composite return option and a withholding-exemption agreement (Form MO-3NR). Missouri offers an optional pass-through entity (PTE) tax election under the SALT Parity Act, RSMo § 143.436 (made on Form MO-PTE) as a federal SALT-cap workaround. See Part 5.

This package contains:

• Part 1 — Federal eligibility checklist (IRC § 1361)
• Part 2 — Form 2553 line-by-line guide
• Part 3 — Shareholder consent statement
• Part 4 — Entity interplay (LLC electing S status)
• Part 5 — Missouri state overlay (the key state section)
• Part 6 — Post-election compliance
• Part 7 — Revocation
• Fillable fields and Sources & References

PART 1 — FEDERAL ELIGIBILITY CHECKLIST (IRC § 1361)

Confirm EVERY item below before filing. A single failed item makes the entity ineligible, and an ineligible election can be denied or later terminated retroactively.

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

☐ Entity is a domestic corporation or an eligible domestic LLC electing corporate treatment
☐ Entity has no more than 100 shareholders (family members may be counted as one — § 1361(c)(1))
☐ Entity has only one class of stock (differences in voting rights alone are permitted — § 1361(c)(4))
☐ Entity is not an ineligible corporation (a bank/thrift using the reserve method of accounting, an insurance company taxed under subchapter L, a possessions-corporation, or a current/former DISC)

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

☐ All shareholders are U.S. citizens or resident aliens (no nonresident aliens — § 1361(b)(1)(C))
☐ No shareholder is a partnership, corporation, or ineligible entity
☐ Any trust shareholders are eligible trusts only (grantor trusts, testamentary trusts within the 2-year window, QSSTs, ESBTs, or voting trusts — § 1361(c)(2), (d), (e))
☐ Estates and certain § 401(a) / § 501(c)(3) tax-exempt organizations are permitted shareholders

Documentation Readiness

☐ Entity is properly formed and in good standing with the Missouri Secretary of State
☐ EIN obtained from the IRS; Missouri Tax Identification Number obtained from the Department of Revenue
☐ Bylaws or operating agreement in place; stock/membership interests issued
☐ Shareholder list with SSN/ITIN, share counts, and acquisition dates assembled

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

Timing — When the Election Must Be Filed (26 U.S.C. § 1362(b))

To be effective for the current tax year, file Form 2553 by the 15th day of the 3rd month of that tax year, OR at any time during the immediately preceding tax year.

Newly formed entities: the 2-month-and-15-day clock starts on the earliest of the date the entity (1) first had shareholders, (2) first had assets, or (3) began doing business.

Part I — Election Information

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

☐ Complete Part II only if Line F selects a tax year other than the calendar year. Most S-corporations use a calendar year. A business-purpose fiscal year or a § 444 election may require additional support.

Parts III–IV

☐ Part III — QSST election (complete only if a Qualified Subchapter S Trust is a shareholder)
☐ Part IV — Late corporate classification representations (LLCs filing under Rev. Proc. 2013-30; see Part 4)

Late Election Relief — Rev. Proc. 2013-30

If the deadline has passed, relief is generally available if filed within 3 years and 75 days of the intended effective date.

☐ Entity intended to be an S-corporation as of the intended effective date
☐ Failure to file timely was due to reasonable cause
☐ The entity (and shareholders) reported consistently with S-status on all affected returns
☐ Write "FILED PURSUANT TO REV. PROC. 2013-30" across the top of Form 2553
☐ Attach a reasonable-cause statement; all shareholders sign the consent (Part 3)

PART 3 — SHAREHOLDER CONSENT STATEMENT

ALL shareholders (and both spouses if shares are community property) must consent in writing. Consent is recorded in column K of Form 2553; the table below also serves as a stand-alone consent record for the corporate book.

By signing below, each shareholder consents to the S-corporation election under 26 U.S.C. § 1362(a) and certifies that the information is true and correct.

Corporate officer attestation

Signature: ________________________________
Name: [____________] Title: [____________] Date: [__/__/____]

PART 4 — ENTITY INTERPLAY (LLC ELECTING S STATUS)

An LLC is not a corporation by default. To be an S-corporation it must first be treated as a corporation for federal tax purposes and then elect S status.

The simplified path (single Form 2553). Under Treas. Reg. § 301.7701-3 and the Form 2553 instructions, an eligible LLC that files only Form 2553 (and meets the timing rules) is deemed to have also made the entity-classification election on Form 8832 to be taxed as a corporation, effective on the same date as the S-election. The LLC generally does not need to file Form 8832 separately.

☐ LLC confirms it is eligible to elect corporate classification
☐ LLC files Form 2553 timely (the deemed § 8832 election rides along)
☐ Effective date on Form 2553 matches the intended corporate-classification date
☐ Operating agreement reviewed for "one class of stock" problems (e.g., disproportionate distribution/liquidation rights can create a second class of stock and disqualify the election)

Missouri note. Missouri follows the federal classification — an LLC treated as an S-corporation federally is an S-corporation for Missouri purposes and files Form MO-1120S. (Note: for the Missouri PTE election, an "S corporation" expressly includes an LLC treated as an S-corporation federally — RSMo § 143.436(2)(6).)

PART 5 — MISSOURI STATE OVERLAY (KEY SECTION)

1. Recognition of the Federal S-Election

☐ Missouri recognizes the federal S-election and treats the entity as a pass-through (RSMo § 143.471).
☐ NO separate Missouri S-election is required. Federal acceptance (IRS Notice CP261) governs.
☐ Every S-corporation that files federal Form 1120-S must file Missouri Form MO-1120S (S-Corporation Income Tax Return) if it has (1) a Missouri-resident shareholder, or (2) any income derived from Missouri sources. Attach a copy of federal Form 1120-S and all Schedules K-1.
☐ Due date: the 15th day of the 4th month following the end of the tax year (e.g., April 15 for a calendar-year filer); the return must cover the same period as the federal Form 1120-S.

2. Entity-Level Missouri Tax

☐ For income tax purposes, an S-corporation's income generally passes through to shareholders, who report it on their Missouri individual returns (Form MO-1040); the entity itself generally pays no Missouri corporate income tax absent the PTE election.

3. Nonresident Shareholders / Composite Filing (RSMo § 143.411)

☐ An S-corporation with nonresident individual shareholders must file Form MO-1NR (income tax withheld) and submit copies of Form MO-2NR (statement of income tax payments) unless an exception applies.
☐ Composite option: a nonresident shareholder not otherwise required to file may elect to have Missouri tax paid as part of the S-corporation's composite return (one exception to withholding).
☐ Withholding exemption: a nonresident shareholder may request the S-corporation be exempt from withholding by filing Form MO-3NR (Partnership or S-Corporation Withholding Exemption or Revocation Agreement).
☐ Other exceptions: nonresident shareholders with Missouri-assignable federal AGI from the S-corporation under $1,200, and certain liquidation/termination situations.
☐ Form MO-NRS is used to report each nonresident shareholder's Missouri-source income.
☐ Timing: MO-1NR is due by the (extended) due date of the MO-1120S; MO-3NR is due by the MO-1120S due date without regard to extensions.

4. Optional Pass-Through Entity (PTE) Tax Election — SALT Parity Act, RSMo § 143.436 (SALT-Cap Workaround)

Missouri offers an elective entity-level tax as a federal SALT-cap workaround. This is optional — it is not a requirement of S-status.

☐ Under the SALT Parity Act (RSMo § 143.436), a partnership or S-corporation may elect to become an "affected business entity" (ABE) and pay Missouri income tax at the entity level, computed at the highest individual rate (RSMo § 143.011) on Missouri-source net income.
☐ The election is made on the entity's Form MO-PTE (affected business entity tax return) — not by a separate election form. A separate election must be made for each tax year (12 CSR 10-2.436(1)).
☐ Once made for a tax year, the election cannot be revoked for that year (12 CSR 10-2.436(4)).
☐ The election is not effective unless the entity has designated an affected business entity representative for that tax year (via Power of Attorney Form 2827) at or before the time of filing, and the MO-PTE bears the required signatures (12 CSR 10-2.436(2), (5)).
☐ Deadline: the MO-PTE filing deadline (including approved extensions, per the regulation); no election after the deadline.
☐ Members receive a Missouri credit for the ABE tax paid, so the election generally does not change total Missouri tax — its purpose is the federal deduction (cf. IRS Notice 2020-75).
☐ PTE election analyzed with CPA/tax counsel; out-of-state owners considered (their home state may or may not credit Missouri ABE tax)

5. Missouri Entity Maintenance (independent of tax status)

☐ File the annual registration report with the Missouri Secretary of State (corporations) to keep the entity in good standing
☐ Maintain registered agent / registered office in Missouri
☐ Register with the Department of Revenue for a Missouri Tax Identification Number
☐ Keep federal S-acceptance (CP261), MO-1120S filings, and any MO-PTE election records in the corporate book

PART 6 — POST-ELECTION COMPLIANCE

Federal

☐ Retain IRS acceptance letter CP261 permanently (if not received within ~60 days, call IRS Business & Specialty Tax Line at (800) 829-4933)
☐ File Form 1120-S annually; issue Schedule K-1 to each shareholder
☐ Maintain a single class of stock and monitor shareholder eligibility — an ineligible transfer or a second class of stock can terminate the election

Reasonable Compensation (shareholder-employees)

☐ Pay shareholder-employees reasonable compensation for services as W-2 wages before taking distributions. The IRS may recharacterize disguised wages and assess payroll taxes, penalties, and interest. Document the basis for compensation (comparable salaries, duties, time, revenue).

Built-In Gains Tax — 26 U.S.C. § 1374

☐ If the entity converted from C-corporation status, watch the built-in gains (BIG) tax on net recognized built-in gains during the 5-year recognition period. The BIG tax is imposed at the corporate level (currently 21% federally) on appreciation that existed at conversion. Plan dispositions of appreciated assets accordingly.

Passive Investment Income — 26 U.S.C. § 1375

☐ If the entity has C-corporation earnings and profits (E&P) and passive investment income exceeds 25% of gross receipts, a § 1375 entity-level tax applies. If this persists for 3 consecutive years, the S-election terminates under § 1362(d)(3). Monitor passive-income levels each year.

Missouri

☐ File Form MO-1120S annually (with federal 1120-S and K-1s attached) by the 15th day of the 4th month after year-end
☐ File Form MO-1NR / issue Form MO-2NR for nonresident shareholders; honor any MO-3NR exemption; file a composite return where elected
☐ If the PTE election was made: file Form MO-PTE, maintain the ABE representative designation, and furnish members their credit information
☐ File the Secretary of State annual registration report; maintain registered agent
☐ Shareholders report flow-through income on Form MO-1040

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

Voluntary Revocation — § 1362(d)(1)

☐ Shareholders holding more than 50% of the shares (voting and nonvoting) must consent
☐ File a revocation statement with the IRS Service Center where Form 2553 was filed (no official form — a letter referencing § 1362(a) and stating the number of shares, with shareholder consents attached)
☐ Effective date: if filed by the 15th day of the 3rd month of the tax year, revocation is effective the first day of that year; otherwise it is effective the first day of the next tax year. A prospective date may be specified.

Involuntary Termination — § 1362(d)(2)–(3)

The election terminates automatically if:

☐ The entity ceases to qualify under § 1361 (e.g., exceeds 100 shareholders, issues a second class of stock, or an ineligible person acquires stock)
☐ Passive investment income exceeds 25% of gross receipts for 3 consecutive years while the entity has accumulated C-corporation E&P (§ 1362(d)(3))

Post-Termination

☐ A 5-year wait generally applies before re-electing without IRS consent (§ 1362(g))
☐ Address the post-termination transition period for distributions and loss carryovers
☐ On reversion to a C-corporation, the entity becomes subject to Missouri corporate income tax; re-run the Missouri tax projection. The Missouri PTE/ABE election is available only to partnerships and S-corporations
☐ Update Secretary of State filings if the entity also changes its legal form

FILLABLE FIELDS SUMMARY

SOURCES AND REFERENCES

• 26 U.S.C. §§ 1361–1368 (Subchapter S); §§ 1374, 1375 (entity-level taxes)
• 26 U.S.C. § 1362 (election, revocation, termination)
• IRS Form 2553 and Instructions (Rev. 12/2020 or current)
• Rev. Proc. 2013-30 (late election relief)
• Treas. Reg. § 1.1362-6 (election procedures); Treas. Reg. § 301.7701-3 (entity classification / deemed Form 8832)
• IRS Notice 2020-75 (deductibility of state PTE taxes)
• RSMo § 143.471 — S corporations (Missouri treatment); § 143.411 — nonresident shareholder withholding
• RSMo § 143.436 — SALT Parity Act (affected business entity tax); 12 CSR 10-2.436 (implementation)
• Missouri Department of Revenue — Form MO-1120S (S-Corporation Income Tax Return) and Instructions; Forms MO-1NR, MO-2NR, MO-3NR, MO-NRS; Form MO-PTE; Form 2827 (Power of Attorney)
• Missouri Secretary of State — annual registration report
• Companion: business_formation/universal/s_corp_election_guide.md