S-Corp Election in Hawaii (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 a Hawaii limited liability company (LLC) or corporation, you file IRS Form 2553, Election by a Small Business Corporation, with the Internal Revenue Service (IRS). Hawaii recognizes the federal S election, and the S corporation then files Hawaii Form N-35, the S Corporation Income Tax Return, with the Department of Taxation.

S-Corp Election Overview for Hawaii Businesses

Electing S-corporation status is a federal tax election made with the IRS, not with Hawaii's Department of Commerce and Consumer Affairs (DCCA) or the Hawaii Department of Taxation. This election changes how a business entity - either an LLC or a traditional C-corporation - is taxed at the federal level, and Hawaii conforms to that federal treatment for state income tax purposes. This means that if your business is recognized as an S corporation by the IRS, it is generally treated as an S corporation by Hawaii, though it must still file a Hawaii return to report that income.

The primary benefit of an S-corp election for many small businesses is the potential for 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 taken as distributions 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 on shareholder eligibility and stock structure. For a broader comparison, see S-corp vs. LLC and LLC vs S-corp tax.

How to Elect S-Corp Status in Hawaii

The election itself is a federal filing. There is no separate state form to make the S election in Hawaii - the state simply follows your federal status - but you will file a Hawaii S corporation return once the election is in place. The steps are as follows:

1. Form a qualifying entity: First, you need an eligible business entity - a Hawaii LLC or corporation properly registered with the Hawaii DCCA Business Registration Division. For an LLC, make sure you have an Employer Identification Number (EIN) from the IRS, which is required for any entity electing S-corp status.
2. Meet S-corp eligibility requirements: The IRS requires the entity to be a domestic corporation, have no more than 100 shareholders, have only individuals, certain trusts, and estates as shareholders, have only one class of stock, and not be an ineligible corporation.
3. File IRS Form 2553: To make the election, file IRS Form 2553, Election by a Small Business Corporation, with the IRS. The form asks for entity details, shareholder information and consents, and the effective date of the election.
4. Receive IRS approval: After the IRS reviews and approves the election, it sends a CP261 notice confirming S-corporation status. Retain that letter with your permanent records.
5. File Hawaii Form N-35: Once the S election is effective, the entity files Hawaii Form N-35, the S Corporation Income Tax Return, with the Department of Taxation for each tax year, and issues Hawaii Schedule K-1s to shareholders.

Because Hawaii conforms to the federal election, you do not file a separate state election form; the N-35 is a reporting return, not the election itself.

Form 2553 Filing Deadlines and Late Elections

The timing of your Form 2553 filing determines which tax year the election takes effect. Under IRS rules, 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 that tax year.

For example, for a calendar-year entity (tax year ending December 31), to make the S-corp election effective for January 1, 2026, you must file Form 2553 by March 15, 2026. For a newly formed business, the 2-month-and-15-day period begins on the date the entity first has shareholders, acquires assets, or begins doing business, whichever is earliest.

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 reported income consistently with the intended election. The instructions to Form 2553 and IRS Publication 542, Corporations, explain the late-election relief procedure.

Hawaii State Income Tax Treatment of S-Corps

Hawaii conforms to the federal income tax treatment of S corporations, so for Hawaii income tax purposes an S corporation is generally a pass-through entity. The corporation itself usually does not pay Hawaii net income tax at the entity level. Instead, the income, losses, deductions, and credits pass through to shareholders in proportion to ownership, and shareholders report their shares on their individual Hawaii income tax returns.

Key aspects of Hawaii's treatment include:

• Form N-35 filing: The S corporation files Hawaii Form N-35, the S Corporation Income Tax Return, reporting the entity's income and each shareholder's distributive share. It is generally due by the 20th day of the fourth month after the close of the tax year (April 20 for calendar-year filers); confirm the current due date in the N-35 instructions.
• Shareholder reporting: Each shareholder receives a Hawaii Schedule K-1 (Form N-35) and reports the income on the Hawaii individual income tax return (Form N-11 or N-15).
• General excise tax (GET): Hawaii has no traditional sales tax. Instead it levies a general excise tax on the gross income of businesses. An S corporation doing business in Hawaii owes GET on its gross receipts regardless of its pass-through income tax status.
• Nonresident shareholders: Hawaii has rules for withholding or composite reporting on nonresident shareholders' Hawaii-source income; the N-35 instructions address these obligations.

While S corporations generally avoid entity-level income tax, they remain subject to GET and to employer taxes such as unemployment insurance if they have employees. For statutory detail, see Hawaii Revised Statutes Chapter 235 on income tax and the general excise tax overview from the Department of Taxation.

Hawaii LLCs Electing S-Corp Status

A Hawaii LLC can elect to be taxed as an S corporation. By default, a single-member LLC is a disregarded entity (a sole proprietorship for tax purposes) and a multi-member LLC is a partnership. Electing S-corp status changes this federal tax classification by filing Form 2553 with the IRS. LLC owners often choose it to potentially reduce self-employment taxes once profits comfortably exceed a reasonable salary.

When a Hawaii LLC elects S-corp status, it keeps its legal structure as an LLC under Hawaii law, so it retains the liability protection and operational flexibility of an LLC. The election changes only its tax treatment. The LLC must still meet all Hawaii LLC requirements, such as maintaining a registered agent and filing its annual report with the DCCA, and it will now file Form N-35 in place of a partnership return.

The decision to elect S-corp status for an LLC should weigh the potential tax savings against the added administrative burden, including payroll processing for owner-employees and stricter compliance with IRS reasonable-compensation rules. Model the numbers for your situation using our SE tax calculator and see Form 2553 explained before deciding.

Maintaining S-Corp Status in Hawaii

Once a Hawaii business has elected S-corp status, it must continue to meet federal and state requirements to keep that status. Failure to comply can cause involuntary termination of the S election, reverting the entity to C-corporation (or default LLC) taxation and creating unexpected tax bills.

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 (no more than 100 shareholders; one class of stock).
  • Pay owner-employees a "reasonable salary" for services, subject to payroll taxes, before taking distributions.
• Hawaii compliance:
  • File Hawaii Form N-35 each year and issue Hawaii Schedule K-1s to shareholders.
  • Register for and remit general excise tax (GET) on gross income.
  • Keep the entity in good standing with the DCCA by filing the required annual report.

Stay informed about federal and Hawaii tax changes that can affect S corporations. For the federal-to- state workflow and estimated payments, see how to file business taxes and the national business tax hub.

Frequently Asked Questions

How do I elect S-corp status in Hawaii?

File IRS Form 2553, Election by a Small Business Corporation, with the IRS. Hawaii recognizes the federal election; the S corporation then files Hawaii Form N-35 with the Department of Taxation. There is no separate state election form.

Does Hawaii recognize federal S-corp elections?

Yes. Hawaii conforms to the federal S-corporation election, so an entity treated as an S corporation for federal income tax is treated the same for Hawaii income tax and reports on Form N-35.

What is the deadline to file Form 2553 for a Hawaii S-corp?

For the election to be effective for the current tax year, file Form 2553 by the 15th day of the third month of the tax year, or at any time during the preceding tax year. The IRS may grant late-election relief for reasonable cause.

Do S-corps pay Hawaii state income tax?

Generally the S corporation does not pay Hawaii income tax at the entity level. Income passes through to shareholders, who report their shares on their Hawaii returns. The S corporation still files the informational Form N-35.

What Hawaii tax form does an S-corp file?

A Hawaii S corporation files Form N-35, the S Corporation Income Tax Return, with the Department of Taxation, and issues each shareholder a Hawaii Schedule K-1. It also owes general excise tax on its gross income.

Related

• S-Corp vs LLC (cluster hub)
• How to get an EIN
• Hawaii Registered Agent
• Hawaii Annual Report
• S-Corp Election in California (sibling)
• S-Corp Election in Texas (sibling)
• Business Tax
• How to Form an LLC in Hawaii

Sources

1. IRS - About Form 2553, Election by a Small Business Corporation.
2. IRS - S Corporations (overview of federal rules).
3. IRS - Publication 542, Corporations (S-corp eligibility and late-election relief).
4. IRS - About Form 1120-S, U.S. Income Tax Return for an S Corporation.
5. IRS - Get an Employer Identification Number (EIN).
6. Hawaii Department of Taxation - Corporate Income Tax Forms (Form N-35).
7. Hawaii Department of Taxation - Individual Income Tax Forms (N-11, N-15) (shareholder reporting).
8. Hawaii Department of Taxation - General Excise Tax (GET) Information.
9. Hawaii DCCA - Business Registration Division (forming and registering entities).
10. Hawaii Revised Statutes - § 235-122, Taxation of an S corporation and its shareholders.
11. Hawaii Revised Statutes - § 235-125, Returns and taxable years (S corporation reporting).
12. Hawaii Revised Statutes - Chapter 237, General Excise Tax Law.
13. Cornell Law School Legal Information Institute - 26 U.S. Code § 1361 - S corporation defined.
14. Cornell Law School Legal Information Institute - 26 CFR § 1.1362-1 - Election to be an S corporation.

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 Hawaii Department of Taxation before acting.