S-Corp Election in Washington: Form 2553 (2026)

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

To elect S-corporation status in Washington you file IRS Form 2553 - a purely federal election - no later than 2 months and 15 days after the beginning of the tax year it is to take effect, or at any time during the preceding tax year. Washington has no personal or business income tax, so the election changes your federal bill, not your state one; the B&O tax applies either way.

Quick Answer

Form: IRS Form 2553, Election by a Small Business Corporation
Deadline: 2 months and 15 days after the tax year begins, or any time in the prior year
Late relief: Rev. Proc. 2013-30 - within 3 years and 75 days, with reasonable cause
Eligibility: 100 shareholders max, one class of stock, no nonresident alien shareholders
Washington income tax: None - no personal or business income tax
Washington B&O tax: Applies to virtually all businesses on gross receipts, election or not

What the S-Corp Election Actually Is

An S corporation is not a type of entity. It is a federal tax election made under section 1362(a) of the Internal Revenue Code by a corporation, or by an LLC eligible to be treated as a corporation. Your Washington LLC stays an LLC on the Secretary of State's records; only the way the IRS taxes it changes.

The change that matters is how owner compensation is treated. Under the default rules, a single-member LLC owner pays self-employment tax of 15.3% on all net earnings. Under an S election, the owner-employee receives a reasonable salary subject to payroll taxes, and remaining profit can be distributed without self-employment tax. That spread is the entire financial case for electing.

"Reasonable" is the constraint that keeps the strategy honest. The IRS actively challenges S corporations that pay token salaries and route the rest through distributions, and it can recharacterise distributions as wages with penalties and interest. Read S-corp vs LLC for the full comparison before you file anything.

Eligibility Requirements

The IRS sets strict limits on who may be an S corporation. The entity may have no more than 100 shareholders; only individuals, estates, certain trusts, and tax-exempt organisations described in section 401(a) or 501(c)(3) may hold stock; nonresident alien shareholders are not permitted; and the entity may have only one class of stock, disregarding differences in voting rights. Spouses and family members can be counted as a single shareholder.

Certain entities are ineligible outright, including banks using the reserve method of accounting for bad debts, insurance companies taxed under subchapter L, and domestic international sales corporations. For a Washington LLC, the practical traps are the one-class-of-stock rule - an operating agreement with preferred distributions can violate it - and non-resident-alien ownership, which is fatal to the election.

The Filing Deadline

Timing is where most elections go wrong. Form 2553 must be filed either no more than 2 months and 15 days after the beginning of the tax year the election is to take effect, or at any time during the preceding tax year. The two-month period begins on the day the tax year starts and ends 15 days after the close of the second calendar month following that month - for a calendar-year business starting January 1, that lands in mid-March.

The form must be signed by an authorised corporate officer - president, vice president, treasurer, or another officer such as a tax officer authorised to sign. Without a signature the election is not treated as timely filed, which is a costly technicality to discover a year later. All shareholders must also consent.

If you miss the window, Rev. Proc. 2013-30 provides late-election relief where the entity files within 3 years and 75 days of the intended effective date, can show reasonable cause for the delay, and shows that shareholders reported income consistently with S corporation status for all affected years. Relief is requested on the same Form 2553 with an explanation attached.

How to File Form 2553

Form 2553 is filed by mail or fax to the IRS service centre designated for your state; the IRS publishes a "Where to File Your Taxes for Form 2553" page, and the addresses changed in 2019, so confirm the current one rather than reusing an old address. There is no electronic filing route for the standalone election.

Before filing, make sure the entity exists and has an EIN, because the form asks for the legal name and EIN exactly as the IRS holds them. Send it certified with return receipt, or keep the fax confirmation - the IRS acknowledges acceptance with a CP261 notice, and if that notice does not arrive within about 60 days you should follow up rather than assume. See getting an EIN in Washington for the sequencing.

Washington Has No Income Tax - but the B&O Tax Still Applies

Washington does not levy a personal or business income tax. Its tax structure instead rests on the business and occupation (B&O) tax, retail sales and use taxes, property taxes, and a range of industry-specific taxes. Because there is no state income tax, the S election has no effect on your Washington state income tax - there is none to affect.

The B&O tax is the part people underestimate. Virtually all businesses in Washington are subject to it, including corporations, LLCs, partnerships, and sole proprietors, nonprofit or for profit. It is measured on gross receipts - not profit - and the rate depends on the classification of your activity, with different rates for retailing, wholesaling, service, manufacturing, and other categories. A business can owe B&O tax in a year it loses money, and an S election does not change that by a cent.

Your B&O filing frequency is assigned by the Department of Revenue after you submit the Business License Application, based on an estimate of the tax you will owe. See Washington LLC tax filing and Washington business licensing for how those pieces fit together.

The Costs of Electing

An S election adds real overhead. You must run payroll for the owner-employee, with withholding, federal employment tax deposits, quarterly Form 941 filings, and W-2s at year end. The entity files its own federal return, Form 1120-S, and issues Schedule K-1s to shareholders. Most owners pay a payroll provider and a tax preparer for work they previously did themselves.

The arithmetic is therefore about scale. Where profit sits comfortably above a defensible salary - often quoted as somewhere north of roughly $50,000 to $80,000 of profit, though the honest answer depends on your industry's salary norms - the self-employment tax saving typically outweighs the overhead. Below that, it usually does not. Model your own numbers with the self-employment tax calculator and Washington self-employment tax.

After the Election: Staying Compliant

Once accepted, the election continues automatically until it is revoked or terminated - you do not refile each year. But it can be terminated inadvertently by breaking an eligibility rule, such as admitting an ineligible shareholder or creating a second class of stock through an amended operating agreement. Review your Washington operating agreement after electing to make sure its distribution provisions do not conflict.

Everything on the Washington side continues unchanged: your annual report to the Secretary of State, your registered agent, your B&O returns, and your business licence renewals. If you are still setting up, see how to form an LLC in Washington and Washington LLC cost; if you are winding down, see how to dissolve an LLC in Washington. Terms are defined in the glossary, and the wider filing picture is in business tax basics.

Frequently Asked Questions

How do I elect S-corp status in Washington?

You file IRS Form 2553, Election by a Small Business Corporation, with the IRS. It is a federal election, so there is no separate Washington filing. The form must be signed by an authorised corporate officer and consented to by all shareholders, and it is submitted by mail or fax to the designated IRS service centre.

When is the Form 2553 deadline?

File no more than 2 months and 15 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 making the election effective January 1, that means filing by roughly mid-March of that same year.

What if I miss the Form 2553 deadline?

Rev. Proc. 2013-30 provides late-election relief if you file within 3 years and 75 days of the intended effective date, show reasonable cause for the delay, and show that shareholders reported their income consistently with S corporation status for all affected years. You request relief on the same Form 2553 with an explanation attached.

Does Washington recognise the federal S election?

There is nothing to recognise in income tax terms, because Washington has no personal or business income tax. The S election changes your federal treatment only. Your Washington business and occupation tax, sales tax, and licensing obligations are unaffected by whether or not you elect S corporation status.

Do S corporations pay Washington B&O tax?

Yes. Virtually all businesses in Washington are subject to the business and occupation tax, including corporations, LLCs, partnerships, and sole proprietors. B&O tax is measured on gross receipts rather than profit, at a rate that depends on your activity classification, so it applies regardless of the S election.

Is an S-corp election worth it in Washington?

It depends on profit. The saving comes from taking part of the profit as a distribution outside self-employment tax after paying a reasonable salary, offset by payroll administration, a separate Form 1120-S return, and higher accounting fees. Businesses with profit well above a defensible salary usually benefit; smaller ones usually do not.

Sources

IRS - About Form 2553, Election by a Small Business Corporation (election under section 1362(a); filing address changed in 2019).
IRS - Instructions for Form 2553 (2 months and 15 days rule; officer signature; 100-shareholder limit; one class of stock; Rev. Proc. 2013-30 relief within 3 years and 75 days).
IRS - S Corporations.
IRS - About Form 1120-S (S corporation income tax return).
IRS - Self-Employment Tax (15.3% rate).
Washington Department of Revenue - Business & Occupation Tax (applies to virtually all businesses; measured on gross receipts).
Washington Department of Revenue - B&O Tax Classifications.
Washington Department of Revenue - Business Tax Structure in Washington State (no personal or business income tax).
Washington Small Business Guide - Run (Form 2553 and business licensing).
Washington Office of Minority and Women's Business Enterprises - Small Business Guide: Run.

LegalGlass provides general information for educational purposes and is not legal advice, is not a law firm, and is not a substitute for advice from a licensed attorney or tax professional. Laws, fees, and thresholds change; verify current amounts with the IRS and the Washington Department of Revenue before acting.