S-Corp Election in North Dakota (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 North Dakota 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. North Dakota recognizes the federal election automatically, so the entity files no separate state election but must file North Dakota Form 60 each year, with income passing through to shareholders.

What an S-Corp Election Is - and Is Not

An "S corporation" is not a type of business entity you form with the North Dakota Secretary 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 North Dakota 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 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. North Dakota generally mirrors the federal pass-through, as explained 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, 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 North Dakota 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 North Dakota, Step by Step

The election is a federal filing, but you also keep your North Dakota 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.
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 North Dakota filings current. North Dakota recognizes the federal election automatically; going forward, file North Dakota Form 60, maintain your registered agent and annual report, and hold 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 North Dakota Treats S Corporations (Form 60)

North Dakota does not require a separate state-level S election. Once the IRS accepts Form 2553, North Dakota treats the entity as an S corporation for state income tax purposes as well, and it files North Dakota Form 60, the S Corporation Income Tax Return, with the Office of State Tax Commissioner. Income generally passes through to shareholders, who report their distributive shares on their individual North Dakota returns, consistent with the federal treatment.

Being an S corporation does not remove every state obligation. The S corporation may need to withhold North Dakota tax on income allocable to nonresident shareholders, or file a composite return on their behalf, and North Dakota offers an elective pass-through entity (PTE) tax that some owners use for federal deduction planning. North Dakota's individual income tax rates are relatively low, so the pass-through generally lands on shareholders at modest state rates. Confirm the current rates, withholding thresholds, and whether a PTE election benefits you with the Office of State Tax Commissioner. Compare the default treatment in North Dakota LLC tax filing and the fees in registered agent guidance. 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 North Dakota withholding, filing quarterly Form 941, and issuing a Form W-2. The federal S corporation return, Form 1120-S, and North Dakota Form 60 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 North Dakota deadline can trigger per-shareholder penalties, so calendar these dates. If your circumstances change, you can revoke the election following the IRS procedure. 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 North Dakota?

The election is not automatically beneficial. It 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 North Dakota, because the state largely mirrors the federal pass-through and has relatively low individual rates, the federal payroll-tax savings drive most of the benefit, without a heavy extra state layer. Below the break-even point, the added cost of running payroll, filing Form 60, and maintaining stricter records can still 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 the analysis is fact-specific, most North Dakota owners model the numbers with a CPA before electing, and consider whether the optional PTE election helps. If an election turns out to be premature, the default treatment in North Dakota 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, New York, or Louisiana, which each treat the election differently at the state level.

Frequently Asked Questions

What is the deadline to file Form 2553 in North Dakota?

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 North Dakota recognize a federal S-corp election?

Yes. North Dakota recognizes the federal S election automatically once the IRS accepts Form 2553. There is no separate state election, but the S corporation must file North Dakota Form 60 each year.

Does a North Dakota S corporation pay state tax?

It is generally a pass-through entity: income flows to shareholders, who report it on their North Dakota returns. The S corporation files Form 60 and may withhold for nonresident shareholders or make an elective pass-through entity tax filing.

Can a North Dakota LLC elect S-corp status?

Yes. An eligible North Dakota LLC can be taxed as an S corporation by filing Form 2553. The LLC keeps its legal form and registered agent; only its federal tax treatment changes.

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 Louisiana (sibling)
• S-corp election in New Hampshire (sibling)
• How to get an EIN
• How to form an LLC in North Dakota

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 § 1363 (effect of election on the corporation).
12. Cornell LII - 26 U.S. Code § 1366 (pass-through to shareholders).
13. North Dakota Office of State Tax Commissioner - Corporate Income Tax (S corporations, Form 60).
14. North Dakota Office of State Tax Commissioner - Individual Income Tax (shareholder pass-through).
15. North Dakota Legislative Branch - N.D. Century Code ch. 57-38 (Income Tax).
16. Justia - N.D. Cent. Code ch. 57-38 (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 North Dakota Office of State Tax Commissioner before acting.