S-Corp Election in Arkansas (Form 2553)

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

To elect S-corporation status in Arkansas, an eligible corporation or LLC must file IRS Form 2553, Election by a Small Business Corporation, with the Internal Revenue Service (IRS). Arkansas generally recognizes the federal S-corp election and does not require a separate state-level S-corp election form.

Overview of S-Corp Election in Arkansas

Electing S-corporation (S-corp) status in Arkansas primarily involves federal tax procedures, as the state generally conforms to federal S-corp designations. An S-corp is a pass-through entity for federal income tax purposes, meaning profits and losses are passed directly to the owners' personal income without being subject to corporate income tax at the federal level. This avoids the "double taxation" that can occur with C-corporations, where profits are taxed at the corporate level and again when distributed to shareholders.

For Arkansas state income tax purposes, S-corporations are also generally treated as pass-through entities. This means the S-corporation itself typically does not pay Arkansas corporate income tax. Instead, the shareholders report their share of the S-corp's income or loss on their individual Arkansas income tax returns. This aligns with the federal treatment and simplifies state tax compliance for many small businesses.

The process begins with forming a corporation or a Limited Liability Company (LLC) in Arkansas, and then making the S-corp election with the IRS. There is no separate state form to file with the Arkansas Department of Finance and Administration (DFA) specifically for S-corp election.

Federal S-Corp Election: IRS Form 2553

The critical step for achieving S-corp status, recognized by both federal and Arkansas authorities, is filing IRS Form 2553, Election by a Small Business Corporation. This form is submitted to the Internal Revenue Service (IRS), not to the state of Arkansas. The election changes how the entity is taxed, not its legal structure as a corporation or LLC.

To be eligible to elect S-corp status, a business must meet specific federal requirements outlined in 26 U.S. Code § 1361. These include:

• Being a domestic corporation.
• Having only one class of stock.
• Having no more than 100 shareholders.
• All shareholders must be individuals, estates, or certain trusts. Partnerships, corporations, or non-resident aliens cannot be shareholders.

If an LLC wishes to be taxed as an S-corp, it must first elect to be taxed as a corporation. This is typically done by filing IRS Form 8832, Entity Classification Election, or by default if the LLC has filed Articles of Incorporation with the Arkansas Secretary of State. Once the LLC is classified as a corporation for tax purposes, it can then file Form 2553 to elect S-corp status, provided it meets all other eligibility criteria.

Filing Deadlines and Late Election Relief

The timing for filing IRS Form 2553 is crucial for the S-corp election to be effective for a desired tax year. Generally, 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 preceding the tax year for which the election is to take effect.

For example, for a calendar year corporation, the election for the current tax year must be filed by March 15th. If filed after this date, the election typically becomes effective for the next tax year.

The IRS does provide relief for certain late S-corp elections. If an entity intended to elect S-corp status but failed to file Form 2553 on time, it may be able to obtain relief under Revenue Procedure 2013-30 or other guidance. This typically requires demonstrating reasonable cause for the late filing and that the entity and its shareholders acted as if the S-corp election was in effect. Consulting with a tax professional is advisable if a late election is necessary.

Arkansas State Tax Implications of S-Corp Status

The Arkansas Department of Finance and Administration (DFA) generally follows the federal classification of an S-corporation. This means that for Arkansas income tax purposes, an S-corporation is typically treated as a pass-through entity. Key implications include:

• No Corporate Income Tax: An S-corporation generally is not subject to Arkansas corporate income tax. Instead, the income, losses, deductions, and credits are passed through to the shareholders.
• Shareholder Taxation: Shareholders of an Arkansas S-corporation report their proportionate share of the S-corp's income or loss on their individual Arkansas income tax returns (Form AR1000F, Arkansas Individual Income Tax Return).
• Composite Returns: Non-resident shareholders of an S-corporation may be required to file a composite return with the Arkansas DFA, or file individual non-resident returns, to report their share of Arkansas-source income.
• Withholding: S-corporations may be required to withhold Arkansas income tax on distributions to non-resident shareholders.
• Other Taxes: S-corp status primarily affects income tax. The entity will still be responsible for other state taxes, such as sales and use tax (if applicable), and employer withholding taxes if it has employees.

It is important to note that while the S-corp itself generally avoids corporate income tax, it still has filing obligations with the Arkansas DFA, such as filing an informational return (e.g., Form AR1100S, S Corporation Income Tax Return) to report its income and distributions to shareholders. Shareholders then use the information from this return to complete their individual tax returns.

Forming the Entity in Arkansas

Before electing S-corp status, a business must first be legally formed as a corporation or LLC in Arkansas. This involves filing organizational documents with the Arkansas Secretary of State.

• For a Corporation: File Articles of Incorporation with the Arkansas Secretary of State. This creates the legal corporate entity.
• For an LLC: File Articles of Organization with the Arkansas Secretary of State. This creates the legal LLC entity. An LLC that wishes to be taxed as an S-corp must then make the federal election to be taxed as a corporation before electing S-corp status.

Both corporations and LLCs will also need to obtain a federal Employer Identification Number (EIN) from the IRS, which is required for tax filing purposes and to open a business bank account. The EIN is obtained regardless of whether the entity elects S-corp status.

Ongoing Compliance for Arkansas S-Corps

Once S-corp status is elected and recognized, the entity must maintain compliance with both federal and state requirements. For Arkansas, this includes:

• Annual Report: Corporations and LLCs in Arkansas must file an annual report with the Arkansas Secretary of State. This is a separate requirement from tax filings and ensures the entity remains in good standing. The annual report typically updates basic information about the entity, such as its registered agent and principal office address. See Arkansas Annual Report for details.
• State Income Tax Filings: Even though an S-corp generally doesn't pay corporate income tax in Arkansas, it must still file an informational income tax return with the Arkansas DFA (e.g., Form AR1100S). This return provides the state with information about the S-corp's income, deductions, and distributions to shareholders.
• Individual Income Tax Filings: Shareholders must file individual Arkansas income tax returns (Form AR1000F) and report their share of the S-corp's income or loss.
• Payroll Taxes: If the S-corp has employees, it must comply with federal and state payroll tax obligations, including withholding income tax and remitting unemployment insurance contributions to the Arkansas Department of Workforce Services.
• Sales and Use Tax: If the S-corp sells tangible personal property or certain services in Arkansas, it must register for and collect Arkansas sales and use tax and remit it to the DFA.

Failure to comply with these ongoing requirements can result in penalties, loss of good standing, or even administrative dissolution of the entity by the state. It is essential for S-corporations to stay informed about their federal and state obligations.

S-Corp vs. LLC in Arkansas

The decision to elect S-corp status, particularly for an LLC, involves weighing various factors. An LLC offers flexibility in management and fewer corporate formalities compared to a traditional corporation. However, an LLC taxed as a partnership or sole proprietorship (default for multi-member and single-member LLCs, respectively) subjects its owners to self-employment tax on all their distributive share of the business's profits.

Electing S-corp status for an LLC can potentially reduce self-employment tax. An S-corp owner who also works for the business must pay themselves a "reasonable salary," which is subject to payroll taxes (Social Security and Medicare). However, any additional profits distributed to the owner as dividends are generally not subject to self-employment tax. This potential tax savings is a primary driver for many LLCs to elect S-corp status. For a comprehensive comparison, see S-Corp vs. LLC.

While S-corp status can offer tax advantages, it also comes with increased administrative burdens, such as stricter accounting requirements, payroll processing for owner-employees, and more complex tax filings. Business owners in Arkansas should consult with a qualified tax advisor to determine if S-corp election is appropriate for their specific situation.

Frequently Asked Questions

How do I elect S-corp status in Arkansas?

To elect S-corporation status in Arkansas, an eligible entity must file IRS Form 2553, Election by a Small Business Corporation, with the Internal Revenue Service (IRS). Arkansas generally conforms to the federal S-corp election, so no separate state-level S-corp election form is typically required by the Arkansas Department of Finance and Administration (DFA).

Does Arkansas require a separate state S-corp election form?

No, Arkansas generally does not require a separate state-level S-corporation election form. The Arkansas Department of Finance and Administration (DFA) typically recognizes the federal S-corp election made by filing IRS Form 2553 with the IRS.

What are the eligibility requirements for S-corp status?

To qualify for S-corp status, a corporation must be a domestic corporation, have only one class of stock, have no more than 100 shareholders, and all shareholders must be U.S. citizens or resident aliens. Certain types of trusts and estates can also be shareholders. Partnerships, corporations, or non-resident aliens cannot be shareholders.

What is the deadline for filing Form 2553?

IRS Form 2553 must generally 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 preceding the tax year for which the election is to take effect. Late elections may be granted relief under certain circumstances.

How does S-corp status affect Arkansas state taxes?

For Arkansas income tax purposes, an S-corporation generally passes its income, losses, deductions, and credits through to its shareholders. The S-corporation itself is typically not subject to Arkansas corporate income tax, but its shareholders report their share of the S-corp's income or loss on their individual Arkansas income tax returns.

Can an LLC elect S-corp status in Arkansas?

Yes, an Arkansas LLC can elect to be taxed as an S-corporation by filing IRS Form 2553. To do so, the LLC must first elect to be taxed as a corporation by filing IRS Form 8832, Entity Classification Election, or by default if it has filed Articles of Incorporation with the Arkansas Secretary of State. Once taxed as a corporation, it can then elect S-corp status if it meets the eligibility requirements.

Related

• S-Corp vs. LLC (cluster hub)
• How to form an LLC in Arkansas
• Arkansas Annual Report
• How to get an EIN
• Business Tax (cluster hub)
• Self-Employment Tax

Sources

1. Internal Revenue Service (IRS) - About Form 2553, Election by a Small Business Corporation.
2. Internal Revenue Service (IRS) - S Corporations.
3. Arkansas Department of Finance and Administration (DFA) - S Corporations (Individual Income Tax).
4. Arkansas Department of Finance and Administration (DFA) - Corporate Income Tax.
5. Arkansas Department of Finance and Administration (DFA) - Individual Income Tax.
6. Arkansas Department of Finance and Administration (DFA) - Corporate Income Tax Forms (e.g., AR1100S).
7. Arkansas Department of Finance and Administration (DFA) - Individual Income Tax Forms (e.g., AR1000F).
8. Arkansas Secretary of State - Corporations Filing Forms & Fees (Articles of Incorporation).
9. Arkansas Secretary of State - LLCs Filing Forms & Fees (Articles of Organization).
10. Internal Revenue Service (IRS) - Publication 542, Corporations (includes S corporation eligibility and late election relief).
11. Internal Revenue Service (IRS) - Publication 583, Starting a Business and Keeping Records (includes EIN information).
12. Cornell Law School Legal Information Institute (LII) - 26 U.S. Code § 1361 - S corporation defined.
13. Cornell Law School Legal Information Institute (LII) - 26 U.S. Code § 1362 - Election; revocation; termination.
14. Internal Revenue Service (IRS) - About Form 8832, Entity Classification 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 Arkansas Secretary of State, Arkansas Department of Finance and Administration, and the IRS before acting.