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

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

You make an S-corp election in Delaware by filing IRS Form 2553 no later than 2 months and 15 days after the start of the tax year the election should take effect. Delaware follows the federal election automatically — there is no separate state form — but the S corporation still files Delaware Form 1100S and keeps its franchise tax and annual report current.

What an S-Corp Election Is

An "S corporation" is not a type of entity you form with the state — it is a federal tax election. You first have a corporation or a limited liability company, then you ask the IRS to tax it under Subchapter S of the Internal Revenue Code. Making the election changes how profits are taxed: instead of the entity paying corporate income tax (a C corporation) or the owner paying self-employment tax on all profit (a default LLC), income passes through to owners, who can be paid a salary plus distributions. For the broader comparison, see S-Corp vs LLC and our business tax hub.

The election is made on IRS Form 2553. Every shareholder (or LLC member) must consent. Because the S election is federal, the same Form 2553 works whether your entity is organized in Delaware or another state. Delaware's role is limited: it recognizes the federal election and taxes the entity as an S corporation for state purposes. This guide explains eligibility, the deadline, and the Delaware obligations that continue after you elect.

It helps to understand what you are electing away from. By default, a single-member LLC is a disregarded entity and a multi-member LLC is a partnership, so all net profit is subject to self-employment tax on the owners' returns. A corporation that makes no election is a C corporation, taxed at the entity level and again when profits are distributed as dividends — the classic "double taxation." The S election is the middle path: a single layer of tax, income passing through to owners, and the ability to characterize part of an owner-employee's return as wages and part as distributions. That distinction is where the potential employment-tax savings comes from, and it is the reason owners weigh the extra payroll and filing work.

Eligibility Requirements for S-Corp Status

To qualify for an S election, the entity must be a domestic corporation or LLC and meet strict shareholder rules. It may have no more than 100 shareholders, and all shareholders must be eligible — generally U.S. citizens or resident individuals, certain trusts, and estates. It may not have nonresident alien shareholders, and it may have only one class of stock (differences in voting rights are allowed, but not differences in distribution or liquidation rights). Partnerships and corporations generally cannot be shareholders.

An LLC can elect S status if it meets these tests; the check-the-box rules treat the Form 2553 as also electing corporate classification, so a separate Form 8832 is usually not required. Before electing, confirm your ownership structure fits the rules, and make sure your entity is in good standing. You can verify status with the Delaware business entity search and review single-member LLC mechanics if you own the business alone.

How to Make the Election, Step by Step

1. Confirm eligibility. Check the shareholder count, eligible-owner, and one-class-of-stock tests above so the IRS does not reject the election.
2. Get an EIN. The entity needs a federal EIN before filing; the number and entity details go on Form 2553.
3. Complete and file Form 2553. Enter the effective date, the tax year, and every shareholder's name, ownership, and signed consent. File by mail or fax to the IRS service center for your state within the deadline.
4. Address Delaware treatment. No separate Delaware election is needed. Going forward, file Delaware Form 1100S and keep the entity's franchise tax and annual report current with the registered agent on file.
5. Set up payroll. Put owner-employees on payroll at a reasonable salary, withhold and remit employment taxes, and document how distributions are handled.

Keep a copy of the accepted election (the IRS sends a CP261 notice) with your records. If you missed the deadline, the IRS provides late-election relief under Revenue Procedure 2013-30 when you had reasonable cause and have otherwise acted as an S corporation.

The Form 2553 Deadline

Timing is the most common trap. To take effect for the current tax year, Form 2553 must be filed no later than 2 months and 15 days after the beginning of that tax year. For a calendar-year business starting January 1, that puts the deadline around March 15. You may also file at any time during the preceding tax year for an election effective the following year. A newly formed entity's tax year begins when it first has shareholders, acquires assets, or begins doing business — whichever is earliest — so new owners should calendar the deadline immediately after formation.

Miss the window and the entity is taxed under its default rules for the year unless it qualifies for relief. Late-election relief lets many businesses still obtain the intended effective date by attaching a reasonable-cause statement to a properly completed Form 2553. Because the consequences of a rejected or late election are real, confirm the current instructions on the IRS Form 2553 page before filing.

Delaware Tax Treatment of an S Corporation

Delaware conforms to the federal S election: an entity with a valid federal S election is treated as an S corporation for Delaware income tax purposes, with no separate state election form. The S corporation files Delaware Form 1100S, the S Corporation Reconciliation and Shareholders Information Return, with the Division of Revenue. Income passes through to shareholders, who report their shares on their own returns. Resident shareholders pay Delaware personal income tax on their full share; nonresident shareholders are taxed on Delaware-source income, and the S corporation may have withholding or estimated-payment duties for them.

The entity's legal form still drives its non-income obligations. A Delaware corporation that elects S status continues to owe annual Delaware franchise tax and the $50 annual report fee to the Division of Corporations, calculated under either the authorized-shares or assumed-par-value-capital method. A Delaware LLC taxed as an S corporation continues to owe the flat $300 Delaware LLC annual tax. See Delaware LLC tax filing and Delaware LLC cost for the entity-level fees.

Reasonable Salary and Payroll Obligations

The tax advantage of an S corporation comes from splitting an owner-employee's pay between a salary and distributions. Only the salary is subject to Social Security and Medicare (payroll) taxes; distributions are not subject to self-employment tax. To prevent abuse, the IRS requires that S-corporation shareholder-employees be paid reasonable compensation for the services they perform before taking distributions. Paying an artificially low salary to avoid payroll tax is a frequent audit target.

Practically, that means running real payroll: registering as an employer, withholding income and FICA taxes, filing federal Forms 941 and 940, issuing a W-2, and meeting Delaware withholding requirements. These added costs are why an S election usually makes sense only once profits comfortably exceed a reasonable salary. Use our self-employment tax calculator to model the break-even, and compare with a plain Delaware LLC before you elect. As a rough guide, many advisors want net profit well above a market salary before the payroll and filing overhead pays for itself, and clean records protect the election if the IRS reviews compensation.

Frequently Asked Questions

Does Delaware require a separate state S-corp election?

No. Delaware automatically recognizes a corporation or LLC that has a valid federal S election. There is no separate Delaware S-election form; the entity files Delaware Form 1100S as an S corporation for state purposes.

What is the deadline to file Form 2553 for a Delaware business?

File no later than two months and 15 days after the beginning of the tax year the election should take effect, or any time during the preceding tax year. Late elections may qualify for IRS relief.

Can a Delaware LLC elect S-corp status?

Yes. An LLC that meets the eligibility rules can elect S-corporation taxation by filing Form 2553. The LLC keeps its Delaware legal form and its $300 annual LLC tax.

Does a Delaware S corporation still pay franchise tax?

Yes. A Delaware corporation with an S election still owes annual franchise tax and the $50 annual report fee. An LLC taxed as an S corporation still owes the flat $300 Delaware LLC annual tax.

Why elect S-corp status in Delaware?

It lets owner-employees split income between a reasonable salary (subject to payroll tax) and distributions (not subject to self-employment tax), which can lower total employment taxes when profits are high enough.

Related

• S-corp election (cluster hub)
• S-Corp vs LLC
• How to get an EIN
• Business tax basics
• How to form an LLC in Delaware
• S-corp election in Massachusetts (sibling)
• S-corp election in Oregon (sibling)

Sources

1. IRS — About Form 2553 (Election by a Small Business Corporation).
2. IRS — Instructions for Form 2553 (deadline, consents).
3. IRS — S Corporations (overview and eligibility).
4. IRS — S Corporation Employees, Shareholders and Officers (reasonable compensation).
5. IRS — About Form 1120-S (S corporation income tax return).
6. IRS — Get an Employer Identification Number.
7. IRS — Rev. Proc. 2013-30 (late S-election relief).
8. Cornell LII — 26 U.S.C. § 1361 (S corporation defined).
9. Cornell LII — 26 U.S.C. § 1362 (election, revocation, termination).
10. Delaware Division of Revenue — Business Tax Forms (Form 1100S).
11. Delaware Division of Revenue — Business Taxes (S corporation treatment).
12. Delaware Division of Corporations — Pay Franchise Tax (corporate franchise tax, $50 report).
13. Delaware Division of Corporations — Franchise Tax Calculator.
14. Delaware Division of Corporations — LLC/LP Annual Tax ($300).
15. Cornell LII — 26 U.S.C. § 1366 (pass-through of items to shareholders).

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 Delaware Divisions of Revenue and Corporations before acting.