How to Convert an LLC to an S-Corporation (2026 Guide)

Many business owners begin with an LLC but later choose to elect S-Corporation taxation to reduce self-employment taxes.

The process is relatively straightforward but must be done correctly.

Step 1: Confirm Eligibility

To elect S-Corp status, your business must:

• Be a domestic entity
• Have 100 or fewer shareholders
• Have only eligible shareholders
• Have one class of stock

Most LLCs qualify.

The key step is submitting:

IRS Form 2553 — Election by a Small Business Corporation

This form tells the IRS you want the business taxed as an S-Corporation.

Form 2553 must generally be filed:

Within 75 days of the beginning of the tax year

If you miss the deadline, you may still qualify for late election relief.

S-Corp owners must pay themselves a reasonable salary.

This salary is subject to payroll taxes.

However, remaining profits can be distributed as dividends, which are not subject to self-employment tax.

S-Corporations require additional compliance:

• Payroll filings
• Corporate tax return (Form 1120-S)
• Shareholder K-1 forms

Because of these requirements, many owners work with accountants to manage compliance.

Electing S-Corp taxation can create substantial tax savings for profitable businesses.

However, the decision should be based on income level, administrative costs, and long-term tax strategy.

Consulting with a tax professional can help determine whether the election makes financial sense.