S-Corp Election in Virginia (Form 2553)

Fact-checked by the LegalGlass editorial team against primary sources · Published Aug 20, 2026 · Last updated Aug 20, 2026

Virginia does not have a separate state S-corporation election. You make one filing — IRS Form 2553, due within two months and fifteen days of the start of the tax year — and Virginia follows the federal classification. The entity then files Virginia Form 502 and may elect the 5.75% pass-through entity tax.

What the S-Corp Election Actually Is

An S corporation is not a type of entity you form at the State Corporation Commission. It is a federal tax classification layered onto an entity that already exists. Your Virginia LLC stays an LLC under Virginia law — same operating agreement, same members, same liability shield — and the election only changes how the IRS taxes its income. A Virginia corporation can make the same election.

The point of the election is self-employment tax. In a default LLC, the members' entire share of business profit is subject to the 15.3% self-employment tax. In an S corporation, the owner-employee is paid reasonable compensation as W-2 wages, which carries FICA, and the remaining profit is distributed without self-employment tax. When profit meaningfully exceeds a reasonable salary for the work performed, that difference is real money. When it does not, the payroll and accounting overhead swallows the savings. See S-corp vs LLC for the full comparison and self-employment tax for the baseline.

Eligibility Requirements

Not every business qualifies. The entity must be a domestic corporation, or an LLC eligible to be treated as one; have no more than 100 shareholders, with family members countable as one; have only allowable shareholders — individuals, estates, and certain trusts, but not partnerships, corporations, or nonresident aliens; have only one class of stock, meaning identical rights to distribution and liquidation proceeds; and not be an ineligible corporation such as certain financial institutions and insurance companies.

The one-class-of-stock rule is where LLCs most often trip. An operating agreement with preferred returns, tiered waterfalls, or disproportionate distributions can create a second economic class and void the election. If you are electing S status for a multi-member Virginia LLC, have the operating agreement reviewed and conformed before you file Form 2553, not after.

The Form 2553 Deadline

The rule is precise. File Form 2553 no more than two months and fifteen days after the beginning of the tax year the election is to take effect, or at any time during the preceding tax year. For a calendar-year business electing for the current year, that lands in mid-March. A newly formed entity measures the window from the earliest of the date it first had shareholders, first had assets, or first began doing business — not from the date the SCC accepted its filing, which is a distinction that catches people out.

Miss the window and the election generally takes effect the following tax year. The practical escape hatch is Rev. Proc. 2013-30, which lets a business file a late election and have it treated as timely when it had reasonable cause, intended to be an S corporation from the requested date, and has otherwise reported consistently. You attach a reasonable-cause statement to a late-filed Form 2553. Relief is common but not automatic, and it is far easier to simply calendar the deadline.

Form 2553 carries no filing fee. It is mailed or faxed to the IRS service center designated for Virginia filers in the current instructions — check the "Where To File" table in those instructions rather than reusing an address from an old form, because the IRS moves them. Every shareholder must consent by signing, and the form must be signed by an authorized officer.

How Virginia Treats the Election

Virginia conforms to the federal classification. There is no separate Virginia S-corporation election to file, no state form to elect, and no state-level approval to wait for. Once the IRS accepts Form 2553, Virginia treats the business as an S corporation automatically for state income tax purposes.

What Virginia does require is an annual return. A Virginia S corporation files Form 502, the Pass-Through Entity Return of Income, reporting the entity's income and each owner's share, and issuing Virginia Schedules VK-1 to the owners. The entity generally pays no Virginia income tax itself under the default treatment — the owners report their shares on their individual Virginia returns. Nonresident owners bring an additional wrinkle: the entity may owe withholding on their Virginia-source income. See Virginia LLC tax filing for the mechanics.

Virginia's Elective Pass-Through Entity Tax

Virginia offers a pass-through entity tax, or PTET, that a qualifying entity may elect to pay at the entity level at a rate of 5.75% on its Virginia taxable income, filed on Form 502PTET. Owners then claim a credit on their Virginia individual returns for their share of the tax the entity paid, so the income is not taxed twice by Virginia.

The reason to elect it is federal, not state. Because the entity rather than the individual pays the Virginia tax, the payment is deductible at the entity level and is not subject to the federal cap on individual state and local tax deductions. For owners who itemize and are constrained by that cap, the PTET can produce a meaningful federal benefit; for owners who take the standard deduction, it usually does not. The election is made annually and has its own estimated-payment rules, so review the current Virginia Tax guidelines with your preparer before choosing it.

Reasonable Compensation and Payroll

The election's benefit depends entirely on getting the salary right. The IRS requires an owner-employee who performs services to receive reasonable compensation before taking distributions — broadly, what you would have to pay someone else to do the same job in the same market. Set it too low to shrink payroll tax and you invite reclassification of distributions as wages, with back taxes, interest, and penalties.

Running payroll means real infrastructure: federal tax deposits on schedule, quarterly Forms 941, an annual Form 940, W-2s in January, and on the Virginia side a withholding account with Virginia Tax and an unemployment insurance account with the Virginia Employment Commission. Budget for a payroll service and for a somewhat more expensive tax return. As a rough screen, the election starts to pay for itself when net profit runs well above a reasonable salary for the work — commonly cited in the range beginning around the high five figures — but the honest answer depends on your salary benchmark, your state, and your benefits, so model it rather than assuming.

Filing the Election, Step by Step

1. Confirm eligibility. Check the shareholder count, shareholder types, and the single-class-of-stock requirement against your operating agreement.
2. Get an EIN. The entity needs one before it can file Form 2553 or run payroll; see how to get an EIN.
3. Benchmark a reasonable salary. Document comparable pay for your role, hours, and market before the first payroll run.
4. Complete Form 2553. Enter the effective date, choose the tax year, and collect every shareholder's signed consent.
5. File on time. Mail or fax it to the service center listed for Virginia in the current instructions, and keep proof of filing.
6. Set up payroll and Virginia accounts. Register for Virginia withholding and unemployment insurance, and start W-2 wages.
7. File annually. Form 1120-S federally, Form 502 with Virginia, Schedules K-1 and VK-1 to owners, and the SCC's $50 annual registration fee in your anniversary month.

Staying Compliant in Virginia

The S election does not change your entity-level obligations to the State Corporation Commission. A Virginia LLC still owes the $50 annual registration fee, due by the last day of the month in which it was formed, with a $25 penalty if it is late and automatic cancellation after continued nonpayment. Virginia does not require an annual information report for LLCs — the fee is the whole obligation. See Virginia annual registration and keep a Virginia registered agent in place continuously.

If the election stops making sense, it can be revoked, but S status generally cannot be re-elected for five years afterward without IRS consent, so treat revocation as a considered decision rather than a year-to-year toggle. Review the arrangement annually: check that the salary is still reasonable as the business grows, that the PTET election still helps, and that the entity remains eligible after any change in ownership. For the underlying entity questions, start with how to form an LLC in Virginia.

Frequently Asked Questions

What is the deadline to file Form 2553?

File no more than two months and fifteen days after the beginning of the tax year the election is to take effect, or at any time during the preceding tax year. For a calendar-year business electing for the current year, that puts the deadline in mid-March. Late elections can often still be accepted under Rev. Proc. 2013-30 relief.

Does Form 2553 cost anything?

No. The IRS charges no filing fee for Form 2553. You file it by mail or fax to the service center listed for your state in the current instructions. Any charge you see is a preparer's or filing service's fee, not a government one, and the form is short enough that many owners complete it themselves.

Who can elect S-corporation status?

The entity must be a domestic corporation or an LLC eligible to be treated as one, have no more than 100 shareholders, have only allowable shareholders such as individuals, certain trusts, and estates, have only one class of stock, and not be an ineligible corporation. Nonresident aliens generally cannot be shareholders.

Does Virginia require a separate S-corp election?

No. Virginia conforms to the federal classification, so a business that is an S corporation for federal purposes is treated as one for Virginia purposes automatically. You file only IRS Form 2553. The state-level obligation is filing Virginia Form 502, the Pass-Through Entity Return of Income, each year.

What is Virginia's pass-through entity tax?

Virginia offers an elective entity-level tax that lets a qualifying pass-through entity pay Virginia income tax at 5.75% on its Virginia taxable income, with owners receiving a corresponding credit. It is filed on Form 502PTET and is chosen mainly to work around the federal cap on state and local tax deductions.

Do I have to pay myself a salary as a Virginia S corporation?

Yes. An owner who works in the business must be paid reasonable compensation as W-2 wages before taking distributions. That triggers federal payroll tax deposits, quarterly Form 941 filings, and Virginia withholding and unemployment insurance registration. Understating the wage to avoid payroll tax is a well-known IRS audit target.

Related

• S-corp vs LLC (national comparison)
• Business tax overview
• Self-employment tax
• How to get an EIN
• How to form an LLC in Virginia
• How much does a Virginia LLC cost?
• Virginia annual registration fee
• Virginia LLC tax filing
• S-corp election in North Carolina (sibling)
• S-corp election in Maryland (sibling)

Sources

1. IRS — About Form 2553, Election by a Small Business Corporation (no filing fee).
2. IRS — Instructions for Form 2553 (deadline; where to file; signature requirements).
3. IRS — S Corporations (eligibility; 100-shareholder and one-class-of-stock limits).
4. IRS — About Form 1120-S, U.S. Income Tax Return for an S Corporation.
5. IRS — About Schedule K-1 (Form 1120-S).
6. IRS — Limited Liability Company (LLC) (electing corporate treatment).
7. IRS — Paying Yourself (reasonable compensation for S-corporation officers).
8. IRS — Rev. Proc. 2013-30 (relief for late S-corporation elections).
9. Virginia Tax — Pass-Through Entities (Form 502 filing requirement and due date).
10. Virginia Tax — Elective Pass-Through Entity Tax Guidelines.
11. Virginia Tax — Virginia Elective Pass-Through Entity Tax (5.75% rate; Form 502PTET).
12. Virginia Tax — Register a Business in Virginia (withholding and sales tax accounts).
13. Virginia State Corporation Commission — Virginia LLC Forms and Fees ($50 annual registration fee).
14. Virginia Law — Va. Code § 13.1-1062 (annual registration fee for LLCs).
15. Legal Information Institute (Cornell) — 26 U.S.C. § 1362, Election; revocation; termination.
16. Legal Information Institute (Cornell) — 26 CFR 301.7701-3 (entity classification election).

LegalGlass provides general information for educational purposes and is not a law firm and is not legal advice or a substitute for advice from a licensed attorney or tax professional. Laws, fees, forms, and deadlines change; verify current requirements with the IRS and Virginia Tax before acting.