Two Forms, Two Very Different Tax Outcomes
IRS forms are hard to parse for most business owners, and Form 2553 vs. Form 8832 is a classic source of confusion. The good news: filing the right one can unlock real, ongoing tax savings for your company. This guide breaks down what each form does, what it's for, and how they differ, so you can avoid costly mistakes and choose the correct IRS form for your situation.
What Is IRS Form 2553?
Form 2553 is the IRS tax form used to elect S corporation status for an eligible domestic corporation or LLC. LLCs and C corporations file it to be taxed as S corporations. In other words, it's the tax classification form that changes how a business entity is treated for federal tax purposes. Form 2553 doesn't apply to every business structure, but filing it is a smart move for many LLCs and C corporations, since it unlocks S corporation tax status and the benefits that come with it.
Why Businesses File Form 2553
Every business entity is assigned a default tax classification. A single-member LLC, for example, defaults to sole proprietorship status, which only qualifies for limited tax benefits. If that LLC wants S corporation treatment instead, it has to file Form 2553. The core purpose of Form 2553 is to secure S corporation tax status, because S corporations offer real advantages to eligible LLCs and C corporations:
- LLCs elect S corp status via Form 2553 to benefit from tax savings, tax deductions, and easier ownership transfers
- C corps elect S corp status via Form 2553 to avoid double taxation and reduce self-employment tax
What Is IRS Form 8832?
Form 8832 is the IRS Entity Classification Election form. LLCs and C corporations use it to be taxed as C corporations or partnerships instead. By filing Form 8832, a business declares its desired classification, partnership or C corp, directly to the IRS. A tax status change made through Form 8832 can save thousands of dollars a year in taxes.
Why Businesses File Form 8832
Like Form 2553, the purpose of Form 8832 is to unlock specific tax benefits, in this case, those of partnerships and C corporations. A multi-member LLC defaults to partnership taxation, but filing Form 8832 lets it be taxed as a C corporation instead, along with the benefits that come with that status.
- LLCs elect C corporation status via Form 8832 for tax savings and business growth
- Corporations elect partnership status via Form 8832 for ownership flexibility while avoiding double taxation
How Each Business Entity Type Is Affected
To make this concrete, here's how Form 2553 and Form 8832 apply across the four common legal business entity types:
- Sole proprietorship
- Single-member LLC
- Multi-member LLC
- Corporation — Each of these entities has a default tax classification, but you can change it by filing Form 2553 or Form 8832. Here's how that plays out entity by entity:
- A sole proprietorship cannot change its tax status by filing either form. Its default status is, and remains, a sole proprietorship.
- A single-member LLC defaults to sole proprietorship taxation. Filing Form 2553 changes it to S corporation status. Filing Form 8832 changes it to C corporation status.
- A multi-member LLC defaults to partnership taxation. To become an S corp or C corp, it must file Form 2553 or Form 8832 respectively.
- A corporation defaults to C corp taxation. Filing Form 2553 changes it to S corp status. Filing Form 8832 changes it to partnership status.
- A foreign entity or disregarded entity can file Form 2553 to be treated as an S corp, but to get C corp status, it must file Form 8832.
Form 8832 or Form 2553: Which One Is Right for You?
The choice between the two forms comes down to several factors, mainly your entity type and which tax benefits matter most to your business. Here's a side-by-side breakdown to make the decision easier.
Eligible Entities and Conditions
| Factor | Form 2553 | Form 8832 |
|---|---|---|
| Disregarded entity | Cannot file Form 2553 | Can file Form 8832 |
| Foreign entity | Cannot file | Unable to file |
| Domestic entity | Able to file Form 2553 | Able to file Form 8832 |
| Shareholder limit | No more than 100 shareholders | Shareholder limits are not necessary |
| Shareholder residency | Shareholders must be U.S. citizens | Shareholders do not need to be U.S. citizens |
Tax Implications
| Tax Factor | Form 2553 | Form 8832 |
|---|---|---|
| Federal tax | S corporations don't need to pay federal income tax | Federal tax depends on the chosen tax classification |
| Double taxation | Avoided at the entity level | May be subject to double taxation for corporations |
| Self-employment tax | Potential reduction for active S corp shareholders | Determined by the chosen tax classification |
| Entity-level tax | No federal income tax | May be subject to corporate-level tax |
| Shareholder-level tax | Income, deductions, and tax liabilities pass through to individual shareholders | Shareholders report income based on the chosen tax classification |
Filing Requirements
| Requirement | Form 2553 | Form 8832 |
|---|---|---|
| Company eligibility | Must meet Form 2553 eligibility requirements | Must meet Form 8832 eligibility requirements |
| Shareholder eligibility | Necessary, per Form 2553 rules | Not necessary |
| Company information | Business information is required | Business information is required |
| Authorized signatures | Required from all members of the company | An authorized person's signature on behalf of the company |
Election Deadlines
| Deadline Type | Form 2553 | Form 8832 |
|---|---|---|
| Initial filing | Within 2 months and 15 days of the beginning of the tax year | Up to 75 days before you file the form, and up to one year after |
| Late filing | Within 3 years and 75 days of the requested effective date | The IRS provides a date after granting late election relief |
FAQs on Form 2553 vs. Form 8832
Can I file Form 8832 and Form 2553 together?
Yes, in some situations you can file both, and it can work to your company's benefit. Here's how: an LLC files Form 8832 to be classified as a corporation, and then that corporation files Form 2553 to elect S corp status. Both forms carry their own requirements and deadlines, so be careful when submitting them together.
Where do I file Form 8832 and Form 2553?
To change your tax classification, you file these forms with the IRS, not with your state.
Can I revert from C corp back to my default tax status?
Yes. Once you change your tax status from LLC to C corporation by filing Form 8832, you can revert to your default status later, but you'll need to account for the tax consequences of doing so.
Can I revert from S corp back to my default tax status?
Yes. LLCs use Form 2553 to elect S corporation status, and if you want to return to your default classification, such as sole proprietorship or partnership, you file Form 2553 again to make that change.
Bottom Line
Both IRS forms matter, just in different circumstances. Now that you know the details behind Form 2553 vs. Form 8832, choosing the right one for your business should be far more straightforward. If you're still unsure, talk to a professional who can match the correct IRS form to your specific business conditions and handle your tax preparation without the hassle.
