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

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

You elect S-corporation status in Connecticut by filing IRS Form 2553 no later than 2 months and 15 days (about 75 days) after the start of the tax year the election takes effect. Connecticut recognizes the federal election automatically with no separate state form, and the S corporation then files Form CT-1065/CT-1120SI and may pay the 6.99% Pass-Through Entity Tax on its Connecticut-sourced income.

What an S-Corp Election Is - and Is Not

An "S corporation" is not a type of business entity you form with the Connecticut Secretary of the State. It is a federal tax election made with the IRS under Subchapter S of the Internal Revenue Code. You first create a legal entity - a corporation or a Connecticut LLC - and then ask the IRS to tax that entity as an S corporation by filing Form 2553. The underlying entity, its registered agent, and its articles of organization do not change; only the federal, and in turn the state, income tax treatment changes.

The appeal of the election is pass-through taxation combined with potential self-employment tax savings. Instead of the entity paying a separate corporate income tax, profits and losses flow through to the owners' individual returns. Owner-employees pay Social Security and Medicare tax only on their salary rather than on all business profit, which is the main reason profitable single-owner businesses compare an S election with the default LLC treatment. For a plain-English comparison, see S-corp vs LLC, the LLC vs S-corp tax breakdown, and the national business tax overview. Connecticut layers its own Pass-Through Entity Tax on top of the federal treatment, discussed below.

Eligibility Requirements for S-Corp Status

Not every business can elect S status. Internal Revenue Code section 1361 limits the election to entities that meet all of the following conditions on the effective date:

• It is a domestic corporation or an eligible domestic business entity such as an LLC.
• It has no more than 100 shareholders (family members can be counted as one).
• Shareholders are only eligible owners - individuals, certain estates, and certain trusts. Partnerships, corporations, and nonresident aliens cannot be shareholders, which is one reason nonresident owners often first obtain an ITIN and confirm residency before electing.
• It has one class of stock (differences in voting rights are allowed, but not differences in distribution or liquidation rights).
• It is not an ineligible corporation (such as certain financial institutions and insurance companies).

If any requirement fails, the election is invalid, so confirm ownership and capital structure before filing. Many Connecticut small businesses that begin as a single-member LLC or a sole proprietorship meet these tests easily. Register any brand names through the trademark process separately; the S election has no effect on intellectual property.

How to Elect S-Corp Status in Connecticut, Step by Step

The election is a federal filing, but you also keep your Connecticut entity in good standing. Follow these steps:

1. Confirm eligibility. Review the checklist above against your ownership and stock structure.
2. Get an EIN. Apply for a free federal Employer Identification Number from the IRS if you do not already have one; Form 2553 requires it. Connecticut businesses can also review the state-specific EIN guide.
3. Hold a vote and collect consents. Obtain the signed consent of every shareholder. Complete Form 2553 with the entity information, effective date, and selected tax year.
4. File on time. Submit Form 2553 to the IRS by mail or fax within 2 months and 15 days of the start of the tax year, or during the preceding year.
5. Keep Connecticut filings current. Connecticut recognizes the federal election automatically; going forward, file Form CT-1065/CT-1120SI and maintain your registered agent, annual report, and any local licenses.

The IRS will send a CP261 notice confirming acceptance. Keep it with your permanent records along with the stamped copy of Form 2553 and your corporate records.

How Connecticut Treats S Corporations (Form CT-1065/CT-1120SI)

Connecticut does not require a separate state-level S election. Once the IRS accepts Form 2553, the entity is treated as an S corporation for Connecticut purposes as well. Connecticut does not impose its Corporation Business Tax on an S corporation, because the entity's income passes through to its shareholders. Instead, the S corporation is a pass-through entity that files Form CT-1065/CT-1120SI, the Connecticut Pass-Through Entity Tax Return, with the Department of Revenue Services (DRS). Income generally passes through to shareholders, who report their distributive shares on their individual Connecticut returns.

Connecticut administers a Pass-Through Entity Tax (PET) on S corporations and other pass-through entities. The PET is imposed at 6.99% of the entity's Connecticut-sourced income, and it was enacted in response to the federal cap on the state and local tax (SALT) deduction. For tax years beginning on or after January 1, 2024, the PET is elective rather than mandatory, so an eligible entity chooses whether to pay at the entity level. Shareholders of an entity that pays the PET are generally entitled to a credit against their Connecticut income tax for their share of the tax paid, which is the mechanism that preserves the federal deduction. Unlike some states, Connecticut does not impose a fixed minimum franchise tax on an S corporation. Compare the numbers in Connecticut LLC tax filing and Connecticut LLC cost before electing, and remember the dissolution process differs for a corporation.

Reasonable Salary, Payroll, and Deadlines

The central compliance rule for an S corporation is reasonable compensation. A shareholder who works in the business must be treated as an employee and paid a reasonable salary through payroll - subject to Social Security, Medicare, and income tax withholding - before taking additional profit as a distribution. Paying an unreasonably low salary to reduce payroll tax is a frequent audit trigger. There is no fixed statutory figure; "reasonable" means what a comparable business would pay for the same work, considering the owner's duties, time, and experience. Owners weighing the trade-off often review the Connecticut self-employment tax analysis, since the salary portion is what remains subject to payroll tax.

Running payroll means registering for federal employment taxes and Connecticut withholding with the DRS, filing quarterly Form 941 federally and Form CT-941 for the state, and issuing a Form W-2. The federal S corporation return, Form 1120-S, is generally due by the 15th day of the third month after the tax year ends - March 15 for calendar-year filers - with Schedule K-1 issued to each shareholder. The Connecticut Form CT-1065/CT-1120SI is generally due on the same March 15 date for calendar-year entities, and entities paying the PET make estimated payments during the year. Missing the federal or Connecticut deadline can trigger per-shareholder penalties, so calendar these dates. If your circumstances change, you can revoke the election following the IRS procedure. Owners comparing the payroll burden often review recordkeeping duties in the glossary first.

Is an S-Corp Election Worth It in Connecticut?

The election is not automatically beneficial. An S election makes the most sense once a business earns more net profit than the owner would reasonably take as salary, because only the salary portion is subject to Social Security and Medicare tax while the remaining distribution is not. In Connecticut, the entity-level PET is generally paired with an offsetting credit at the owner level, so the practical question is whether the federal payroll-tax savings justify running payroll, filing Form CT-1065/CT-1120SI, and maintaining stricter records. Below the break-even point, the added compliance cost can outweigh the savings entirely.

There are also non-tax trade-offs. An S corporation must respect corporate formalities: separate payroll, reasonable compensation, and clean books that distinguish wages from distributions. Owners who mix personal and business funds, or who skip payroll, lose much of the benefit the structure provides and invite IRS scrutiny. Because the analysis is fact-specific, most Connecticut owners model the numbers with a CPA before electing. If an election turns out to be premature, the default treatment described in Connecticut LLC tax filing remains available, and you can revoke and re-elect later, subject to the IRS five-year waiting rule after a revocation.

Keep in mind that the S election changes only income tax treatment. It does not affect your liability shield, your obligation to maintain an operating agreement, your business licenses, your DBA filing, or your duty to keep the entity in good standing through the state registry. Owners comparing states sometimes look at California, Florida, or Delaware, which each treat the election differently at the state level. See also LLC or S-corp and S-corp vs C-corp for structural comparisons.

Frequently Asked Questions

What is the deadline to file Form 2553 in Connecticut?

File within 2 months and 15 days after the beginning of the tax year the election takes effect, or any time during the preceding tax year. Late elections may still qualify for relief under Rev. Proc. 2013-30 if you show reasonable cause.

Does Connecticut recognize a federal S-corp election?

Yes. Connecticut recognizes the federal S election automatically once the IRS accepts Form 2553; no separate state form is needed. The S corporation is treated as a pass-through entity and files Form CT-1065/CT-1120SI with the DRS.

Does a Connecticut S corporation pay the Pass-Through Entity Tax?

A Connecticut S corporation may pay the Pass-Through Entity Tax at 6.99% of its Connecticut-sourced income. For tax years beginning on or after January 1, 2024, the PET is elective, and owners generally receive a credit for their share of PET paid.

Can a Connecticut LLC elect S-corp status?

Yes. An eligible Connecticut LLC can be taxed as an S corporation by filing Form 2553. The LLC keeps its legal form and registered agent but is taxed under Subchapter S and files as a pass-through entity in Connecticut.

What counts as a reasonable salary?

Reasonable compensation is what a comparable business would pay for similar services. The IRS requires shareholder-employees to take a reasonable salary through payroll before distributions; there is no single statutory number.

How do I revoke the election?

File a statement of revocation with the IRS signed by shareholders holding more than half the shares. Timing determines whether it applies to the current or the next tax year.

Related

• Business tax (cluster hub)
• S-corp vs LLC comparison
• S-corp election in California (sibling)
• S-corp election in Florida (sibling)
• How to get an EIN
• How to form an LLC in Connecticut

Sources

1. IRS - About Form 2553, Election by a Small Business Corporation.
2. IRS - Instructions for Form 2553 (eligibility and deadline).
3. IRS - S Corporations (overview and requirements).
4. IRS - S Corporation Employees, Shareholders and Corporate Officers (reasonable compensation).
5. IRS - About Form 1120-S, U.S. Income Tax Return for an S Corporation.
6. IRS - About Schedule K-1 (Form 1120-S).
7. IRS - Rev. Proc. 2013-30 (late S election relief).
8. IRS - Get an Employer Identification Number (free EIN).
9. Cornell LII - 26 U.S. Code § 1361 (S corporation defined).
10. Cornell LII - 26 U.S. Code § 1362 (election; revocation; termination).
11. Cornell LII - 26 U.S. Code § 1366 (pass-through to shareholders).
12. Connecticut DRS - Pass-Through Entity Tax Overview (6.99% rate; Form CT-1065/CT-1120SI).
13. Connecticut DRS - Corporation Business Tax Overview (entity-level corporate tax).
14. Connecticut Secretary of the State - Business Services (Business.CT.gov) (entity registration and filings).
15. Connecticut General Statutes - Chapter 228a, Pass-Through Entity Tax.
16. Connecticut General Statutes - Chapter 229, Income Tax.

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 the Connecticut Department of Revenue Services before acting.