S-Corp Election in New York (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 New York by filing IRS Form 2553 no later than 2 months and 15 days (about 75 days) after the start of the tax year, then filing a SEPARATE New York election on Form CT-6. Without Form CT-6, New York taxes the entity as a C corporation even though the IRS treats it as an S corporation.

What an S-Corp Election Is - and Is Not

An "S corporation" is not a type of business entity you form with the New York Department of 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 New York 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 tax treatment does. New York is unusual because a federal S election is not enough - the state requires its own election, covered below.

The appeal of the election is pass-through taxation combined with potential self-employment tax savings. Instead of the entity paying 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 and the national business tax overview.

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, so 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 New York small businesses that begin as a single-member LLC or a DBA sole proprietorship meet these tests easily. Protect any brand names through the trademark process separately; the S election has no effect on intellectual property.

How to Elect S-Corp Status in New York, Step by Step

New York requires two elections - the federal one and a separate state one. 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; both Form 2553 and Form CT-6 require it.
3. File Form 2553 with the IRS. Complete the form with the entity information, effective date, tax year, and every shareholder's signed consent, and file within 2 months and 15 days of the start of the tax year.
4. File New York Form CT-6. Separately file Form CT-6 with the New York Department of Taxation and Finance so the state also treats the entity as a New York S corporation. All shareholders must consent.
5. Keep New York filings current. Going forward, file Form CT-3-S each year, maintain your registered agent and biennial statement, and hold any local licenses.

The IRS will send a CP261 notice confirming the federal election; New York issues its own acknowledgment of the CT-6. Keep both with your permanent records and your corporate records.

New York's Separate S Election (Form CT-6)

This is the point that trips up the most owners: New York does not automatically follow the federal S election. To be taxed as an S corporation for New York State purposes, a federal S corporation must file Form CT-6, "Election by a Federal S Corporation to be Treated as a New York S Corporation," with the Department of Taxation and Finance, and every shareholder must consent. If you file Form 2553 with the IRS but skip Form CT-6, New York will tax your corporation under the general business corporation franchise tax as if it were a C corporation, which usually means a higher state tax bill and a mismatch between your federal and state returns.

Once the CT-6 election is in effect, the entity files Form CT-3-S, the New York S Corporation Franchise Tax Return, and its income passes through to shareholders on their New York personal returns. Even as an S corporation, New York imposes a fixed dollar minimum tax that scales with the corporation's New York receipts, so there is a floor regardless of profit. Note that New York City does not recognize the New York S election and taxes the corporation separately under its own rules. Confirm the current minimum-tax brackets and city rules with the Department of Taxation and Finance. Compare the default treatment in New York LLC tax filing and the fees in New York LLC cost. Closing the entity later follows the dissolution process.

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.

Running payroll means registering for federal employment taxes and New York withholding, filing quarterly Form 941, and issuing a Form W-2. The federal S corporation return, Form 1120-S, and New York Form CT-3-S are generally due after the tax year ends - the federal return by the 15th day of the third month, March 15 for calendar-year filers - with Schedule K-1 issued to each shareholder. Missing the federal or New York deadline can trigger per-shareholder penalties, so calendar these dates. If your circumstances change, you can revoke the election following the IRS procedure and separately terminate the New York election. Owners weighing the payroll burden often review the registered agent and recordkeeping duties in the glossary first.

Is an S-Corp Election Worth It in New York?

The election is not automatically beneficial, and in New York you must weigh the extra CT-6 step and the fixed dollar minimum tax. 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 New York, the state election preserves pass-through treatment for state income tax, but the fixed dollar minimum tax and separate New York City treatment can reduce the net benefit. Below the break-even point, the added cost of running payroll, filing two elections and Form CT-3-S, and maintaining stricter records can outweigh the savings.

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 New York layers a separate state election and a city that ignores the S status, most owners here model the numbers with a CPA before electing. If an election turns out to be premature, the default treatment in New York 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, or your duty to keep the entity in good standing through the state registry. Owners comparing states sometimes look at Florida, California, or New Hampshire, which each treat the election differently at the state level.

Frequently Asked Questions

What is the deadline to file Form 2553 in New York?

File the federal Form 2553 within 2 months and 15 days after the beginning of the tax year the election takes effect; New York Form CT-6 follows the same timing. Late elections may qualify for relief under Rev. Proc. 2013-30 with reasonable cause.

Does New York require a separate S-corp election?

Yes. New York requires a separate state election on Form CT-6, filed with the Department of Taxation and Finance. A federal S election alone is not enough; without Form CT-6, New York taxes the entity as a C corporation.

What is New York Form CT-6?

Form CT-6 is the election for a federal S corporation to be treated as a New York S corporation. All shareholders must consent. Once approved, the entity files Form CT-3-S and income passes through to shareholders for New York tax.

What tax does a New York S corporation pay?

It files Form CT-3-S and pays the fixed dollar minimum tax based on New York receipts. New York City does not recognize the S election and taxes the corporation separately. Confirm current amounts with the Department of Taxation and Finance.

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?

Revoke the federal election with the IRS and separately terminate the New York election. Because the state election is separate, revoking one does not automatically revoke the other.

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 New York

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. New York Dept. of Taxation and Finance - New York S corporations.
13. New York Dept. of Taxation and Finance - Form CT-6 (New York S election).
14. New York Dept. of Taxation and Finance - Form CT-3-S (S Corporation Franchise Tax Return).
15. New York State Senate - Tax Law § 660 (election by shareholders of S corporations).
16. Justia - N.Y. Tax Law § 660 (S corporation 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 the New York Department of Taxation and Finance before acting.