S-Corp Election in Arizona (Form 2553) (2026)

Fact-checked by the LegalGlass editorial team against primary sources · Published Aug 6, 2026 · Last updated Aug 6, 2026

To elect S-corporation (S-corp) status for an Arizona limited liability company (LLC) or corporation, you must file IRS Form 2553, Election by a Small Business Corporation, with the Internal Revenue Service (IRS). Arizona generally conforms to the federal S-corp election for state income tax purposes, meaning there is no separate state-level S-corp election form.

Quick Answer

Federal Form: IRS Form 2553, Election by a Small Business Corporation
Federal Agency: Internal Revenue Service (IRS)
State Form: None (Arizona conforms to federal election)
State Agency: Arizona Department of Revenue (AZDOR)
State Tax: S-corps generally pass through income to shareholders for Arizona income tax
Deadline: 15th day of 3rd month of tax year, or any time in prior year

S-Corp Election Overview for Arizona Businesses

Electing S-corporation status is a federal tax election made with the IRS, not with the Arizona Secretary of State or the Arizona Department of Revenue (AZDOR). This election changes how a business entity (either an LLC or a traditional C-corporation) is taxed at the federal level, and Arizona generally follows this federal treatment for state income tax purposes. This means that if your business is recognized as an S-corp by the IRS, it will typically be treated as an S-corp by Arizona.

The primary benefit of an S-corp election for many small businesses is the potential for tax savings on self-employment taxes for LLC owners or payroll taxes for corporate officers, by allowing a portion of the owner's compensation to be distributed as dividends rather than salary, subject to reasonable compensation rules. However, S-corp status also comes with additional compliance requirements, such as stricter payroll obligations and specific rules regarding shareholder eligibility and stock structure. For a broader understanding of the implications, see S-corp vs. LLC.

How to Elect S-Corp Status in Arizona

The process for electing S-corp status for an Arizona business involves federal filing requirements. There are no separate forms or applications to file with the Arizona Department of Revenue specifically for S-corp election. The steps are as follows:

Form a qualifying entity: First, you must have an eligible business entity. This can be an Arizona LLC or an Arizona corporation. If you have an LLC, it must first be properly formed with the Arizona Corporation Commission (ACC). If you have a corporation, it must also be properly formed and registered with the ACC. For LLCs, ensure you have an Employer Identification Number (EIN) from the IRS, which is required for any entity electing S-corp status.
Meet S-corp eligibility requirements: The IRS has specific criteria for an entity to qualify as an S-corporation. These include being a domestic corporation, having no more than 100 shareholders, shareholders being individuals (with some exceptions for estates and certain trusts), having only one class of stock, and not being an ineligible corporation (e.g., certain financial institutions, insurance companies).
File IRS Form 2553: To make the S-corp election, file IRS Form 2553, Election by a Small Business Corporation, with the IRS. This form notifies the IRS of your intent to be taxed as an S-corporation. The form requires information about the entity, its shareholders, and the effective date of the election.
Receive IRS approval: After filing Form 2553, the IRS will review your election. If approved, they will send a letter confirming your S-corporation status. It is important to retain this letter for your records.

Once the federal S-corp election is approved, your Arizona business will generally be treated as an S-corp for Arizona income tax purposes without any further state-specific filings.

Form 2553 Filing Deadlines and Late Elections

The timing of your Form 2553 filing is critical for the election to be effective for a desired tax year. According to IRS regulations, for an S-corp election to be effective for the current tax year, Form 2553 must be filed:

By the 15th day of the third month of the tax year for which the election is to take effect, or
At any time during the tax year immediately preceding the tax year for which the election is to take effect.

For example, for a calendar-year entity (tax year ending December 31), if you want the S-corp election to be effective for January 1, 2026, you must file Form 2553 by March 15, 2026. If you form a new business, the 2-month and 15-day period begins on the date the corporation first has shareholders, acquires assets, or begins doing business, whichever occurs first.

If you miss the deadline, the IRS may grant relief for a late S-corp election under certain circumstances. This typically requires demonstrating reasonable cause for the delay and that all shareholders acted as if the election had been made. The instructions for Form 2553 and IRS Publication 542, Corporations, provide detailed guidance on late election relief procedures.

Arizona State Income Tax Treatment of S-Corps

Arizona generally conforms to the federal income tax treatment of S-corporations. This means that for Arizona income tax purposes, an S-corporation is typically a "pass-through" entity. The corporation itself usually does not pay Arizona income tax. Instead, the income, losses, deductions, and credits of the S-corporation are passed through to its shareholders in proportion to their ownership. These shareholders then report their share of the S-corp's items on their individual Arizona income tax returns.

Key aspects of Arizona's treatment include:

No Corporate Income Tax at Entity Level: Arizona Revised Statutes (A.R.S.) § 43-1126 states that an S-corporation is generally not subject to the Arizona corporate income tax.
Shareholder Reporting: Shareholders of an Arizona S-corp will receive a federal Schedule K-1 (Form 1120-S) detailing their share of the S-corp's income, deductions, credits, etc. This information is then used to complete their Arizona Form 140 (Individual Income Tax Return) or the appropriate non-resident return.
Basis Adjustments: Shareholders must track their basis in the S-corp stock, as this affects the taxability of distributions and the deductibility of losses. Arizona generally follows federal rules for basis adjustments.
Composite Returns: For S-corporations with non-resident shareholders, Arizona allows for the filing of a composite return (Form 140NR-PY) by the S-corporation on behalf of its non-resident shareholders, which can simplify filing obligations for those shareholders.

While S-corps generally avoid entity-level income tax, they are still subject to other Arizona taxes, such as transaction privilege tax (TPT, Arizona's sales tax) if they engage in taxable activities, and unemployment insurance taxes if they have employees. For specific guidance, refer to the Arizona Corporate Income Tax Form 120 instructions and Form 141 (Fiduciary Income Tax Return) instructions, as well as relevant Arizona Revised Statutes, particularly Title 43, Chapter 11, Article 2.

Arizona LLCs Electing S-Corp Status

An Arizona LLC can elect to be taxed as an S-corporation. By default, a single-member LLC is treated as a disregarded entity (sole proprietorship for tax purposes), and a multi-member LLC is treated as a partnership. Electing S-corp status changes this federal tax classification by filing Form 2553 with the IRS. This election is often chosen by LLC owners seeking to potentially reduce self-employment taxes.

When an Arizona LLC elects S-corp status, it retains its legal structure as an LLC under Arizona state law. This means it still benefits from the liability protection and operational flexibility of an LLC. The S-corp election only alters its tax treatment. The LLC will still need to comply with all Arizona LLC requirements, such as maintaining a registered agent and filing any necessary annual reports or maintaining statutory agent information with the Arizona Corporation Commission.

The decision to elect S-corp status for an LLC should be made after careful consideration of the potential tax benefits versus the increased administrative burden, including payroll processing for owner-employees and stricter compliance with IRS rules regarding reasonable compensation. Consulting with a tax professional is advisable to determine if S-corp election is appropriate for a specific Arizona LLC.

Maintaining S-Corp Status in Arizona

Once an Arizona business has successfully elected S-corp status, it must continue to meet all federal and state requirements to maintain that status. Failure to comply can result in involuntary termination of the S-corp election, leading to the entity being taxed as a C-corporation (or its default LLC classification) and potentially incurring unexpected tax liabilities.

Key maintenance requirements include:

Federal Compliance:
- File IRS Form 1120-S, U.S. Income Tax Return for an S Corporation, annually by March 15 (for calendar year filers).
- Issue Schedule K-1 (Form 1120-S) to all shareholders.
- Maintain eligibility requirements (e.g., no more than 100 shareholders, only one class of stock).
- Pay owner-employees a "reasonable salary" for services rendered, subject to payroll taxes, before taking distributions.
Arizona Compliance:
- Shareholders must report their share of S-corp income/loss on their individual Arizona income tax returns (Form 140).
- Comply with Arizona transaction privilege tax (TPT) obligations if applicable.
- If the entity is an LLC, continue to meet all Arizona Corporation Commission requirements for LLCs. If it is a corporation, meet all ACC requirements for corporations.

It is important to stay informed about changes in federal and Arizona tax laws that may impact S-corporations. Regular consultation with a qualified tax advisor can help ensure ongoing compliance and optimize tax strategies.

Frequently Asked Questions

How do I elect S-corp status in Arizona?

To elect S-corp status for an Arizona LLC or corporation, file IRS Form 2553, Election by a Small Business Corporation, with the Internal Revenue Service (IRS). There is no separate state-level S-corp election form for Arizona.

Does Arizona recognize federal S-corp elections?

Yes, Arizona generally conforms to the federal S-corporation election for state income tax purposes. An entity treated as an S-corporation for federal income tax is typically treated the same for Arizona income tax, with income and losses passed through to shareholders.

What is the deadline to file Form 2553 for an Arizona S-corp?

For an election to be effective for the current tax year, Form 2553 must be filed by the 15th day of the third month of the tax year, or at any time during the preceding tax year. Late elections may be granted relief under certain circumstances.

Do S-corps pay Arizona state income tax?

Generally, S-corporations themselves do not pay Arizona state income tax. Instead, the income, losses, deductions, and credits are passed through to the shareholders, who report them on their individual Arizona income tax returns (Form 140 or equivalent).

Can an Arizona LLC elect S-corp status?

Yes, an Arizona LLC can elect to be taxed as an S-corporation by filing IRS Form 2553. This changes the LLC's tax classification from its default (disregarded entity or partnership) to an S-corporation for federal and generally for Arizona state income tax purposes.

Sources

IRS - About Form 2553, Election by a Small Business Corporation.
IRS - S Corporations (overview of federal rules).
IRS - Publication 542, Corporations (detailed guidance on S-corp eligibility and elections).
Arizona Department of Revenue - Arizona Income Tax Form 140 Instructions (for individual shareholders).
Arizona Department of Revenue - Arizona Corporate Income Tax Form 120 Instructions (references S-corp treatment).
Arizona Department of Revenue - Arizona Fiduciary Income Tax Form 141 Instructions (references S-corp pass-through).
Arizona Revised Statutes - Title 43, Chapter 1, Article 1, § 43-101 (Definitions) (references federal conformity).
Arizona Revised Statutes - Title 43, Chapter 1, Article 1, § 43-102 (Conformity to Internal Revenue Code).
Arizona Revised Statutes - Title 43, Chapter 11, Article 2, § 43-1121 (Taxation of Corporations).
Arizona Revised Statutes - Title 43, Chapter 11, Article 2, § 43-1126 (S corporations) (explicitly states S-corps generally not taxed at entity level).
Arizona Corporation Commission - Corporations Division Filing Information (for forming LLCs and corporations).
IRS - About Form 1120-S, U.S. Income Tax Return for an S Corporation.
IRS - Get an Employer Identification Number (EIN).
Cornell Law School Legal Information Institute - 26 U.S. Code § 1361 - S corporation defined (federal statutory definition).
Cornell Law School Legal Information Institute - 26 CFR § 1.1362-1 - Election to be an S corporation (federal regulations on election).

LegalGlass provides general information for educational purposes and is not a law firm or a substitute for advice from a licensed attorney or tax professional. Laws, fees, and thresholds change; verify current requirements with the IRS and Arizona Department of Revenue before acting.