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

S-CORPORATION ELECTION PACKAGE — MISSISSIPPI

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 Mississippi 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.

Mississippi in one paragraph. Mississippi recognizes the federal S-election and treats the entity as a pass-through. There is no separate Mississippi S-election — the corporation files Mississippi Form 84-105 only after the IRS has accepted its federal Form 2553. Mississippi offers an optional pass-through entity (PTE) tax election under Miss. Code Ann. § 27-7-26 (made on Form 84-381) 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 — Mississippi 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 Mississippi Secretary of State
☐ EIN obtained from the IRS
☐ 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)

Mississippi note. Mississippi follows the federal classification — an LLC treated as an S-corporation federally is an S-corporation for Mississippi purposes and files Form 84-105 after IRS acceptance.

PART 5 — MISSISSIPPI STATE OVERLAY (KEY SECTION)

1. Recognition of the Federal S-Election

☐ Mississippi recognizes the federal S-election and treats the entity as a pass-through.
☐ NO separate Mississippi S-election is required. The entity files Mississippi Form 84-105 (Pass-Through Entity Income and Franchise Tax Return) — but only after the IRS has accepted the federal Form 2553.
☐ Do NOT file Form 84-105 until the IRS notifies the corporation that the federal S-election has been accepted (per DOR Form 84-100 instructions). Income generally flows through to shareholders, who report it on their Mississippi individual returns (Form 80-105).

2. Entity-Level Mississippi Taxes Absent the PTE Election

☐ For income tax purposes, an S-corporation is generally not subject to Mississippi income tax at the entity level; income passes through to shareholders.
☐ Mississippi corporate franchise tax has been phased out for periods after the statutory phase-out; confirm the current-year franchise tax posture on the Form 84-105 instructions.

3. Optional Pass-Through Entity (PTE) Tax Election — Miss. Code Ann. § 27-7-26 (SALT-Cap Workaround)

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

☐ Under Miss. Code Ann. § 27-7-26 (effective for calendar year 2022 and thereafter), an S-corporation may elect to be taxed as an "electing pass-through entity" and pay Mississippi income tax at the entity level.
☐ The election is made by filing Form 84-381 (Pass-Through Entity Election) and is reflected on Form 84-105 by checking the "Electing Pass-Through Entity" box.
☐ The election requires consent by the threshold in the entity's governing documents or, absent such a provision, by owners holding greater than 50% of voting control.
☐ The election is binding for that year and all later years until revoked (revocation is also filed on Form 84-381 within the prescribed window).
☐ Each shareholder receives a credit for their pro-rata share of the entity-level tax paid; excess credits may be carried forward or refunded at the owner's election (per § 27-7-26 as amended by HB 1668, 2023).
☐ The owners' adjusted basis in their interests is computed without regard to the election (§ 27-7-26(2)).

☐ PTE election analyzed with CPA/tax counsel (benefit depends on owners' federal posture and the $10,000 SALT cap)
☐ Out-of-state owners considered (their home state may or may not credit Mississippi PTE tax)

4. Nonresident Shareholders / Composite Filing

☐ Mississippi provides for nonresident withholding / composite reporting for nonresident shareholders; determine each nonresident's filing posture on the Form 84-105 series.
☐ A nonresident covered by the PTE election or a composite arrangement may not need to file an individual Mississippi return for that income — confirm under current rules.

5. Mississippi Entity Maintenance (independent of tax status)

☐ File the annual report with the Mississippi Secretary of State and pay the fee to keep the entity in good standing
☐ Maintain registered agent / registered office in Mississippi
☐ Keep federal S-acceptance (CP261), Form 84-105 filings, and any 84-381 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.

Mississippi

☐ File Form 84-105 annually (only after IRS S-acceptance) and issue Mississippi K-1 information to shareholders
☐ If the PTE election was made (Form 84-381): pay the entity-level tax and furnish owners their credit information
☐ File the Secretary of State annual report; maintain registered agent
☐ Shareholders report flow-through income on Form 80-105

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
☐ If a Mississippi PTE election (Form 84-381) is in place, revoke or re-evaluate it consistent with § 27-7-26 upon any change in federal classification
☐ 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)
• Miss. Code Ann. § 27-7-26 — Election by partnership, S corporation, or similar pass-through entity to be taxed as an electing pass-through entity (added 2022 HB 1691; amended 2023 HB 1668)
• Mississippi Department of Revenue — Form 84-105 (Pass-Through Entity Income and Franchise Tax Return) and Form 84-100 instructions (file only after IRS accepts federal Form 2553)
• Mississippi Department of Revenue — Form 84-381 (Pass-Through Entity Election / Revocation)
• Mississippi Secretary of State — annual report
• Companion: business_formation/universal/s_corp_election_guide.md