File an Alaska S Corp

Requirements and limitations of S Corporations

Only certain businesses can choose an S Corp election. To be eligible for S Corporation classification, an entity must:

• Be a domestic corporation
• Have only one class of stock
• Have only allowable shareholders, which include individuals, certain trusts, and estates
• Not be an ineligible corporation, such as certain financial institutions, insurance companies, and domestic international sales corporations
• Have no more than 100 shareholders

If your business entity doesn’t meet these filing requirements, it will not qualify for an S Corp classification. 

File Form 2553 with the IRS

If your business does meet these minimum filing requirements, you can then file for election as an S Corp by completing and filing Form 2553 with the IRS. Importantly, this has to be done: 

• No more than 2 months and 15 days after the beginning of the tax year in which the election is to take effect, or
• At any time during the tax year preceding the tax year that the election is to take effect.

Visit the IRS website for more detailed instructions on how to properly and timely file Form 2553 for your Alaska business. 

Which entities can apply for an S Corp designation?

Business structures like limited liability companies (LLCs) and corporations (C Corps) can benefit from an S Corp designation. An LLC can save money on self-employment taxes while a C Corp can avoid double taxation. Learn more about what an S Corp is.  

Filing as an S Corp in Alaska

If you plan to create an Alaska S Corp, you’ll first need to create an LLC or C Corp. From there, you’ll need to file the appropriate paperwork with the IRS in order to get an S Corp election.

If you’re ready to learn about filing as an S corporation in Alaska, we’ll walk you through it. First, we’ll show you how to form an Alaska LLC and how to form a corporation in Alaska. Then we’ll explain how to file for S corp status as either an LLC or corporation.

S-Corp Election Steps for LLCs

For detailed formation steps, see our Alaska LLC formation guide.

• Step 1 – Choose a name
• Step 2 – Appoint a Registered Agent in Alaska
• Step 3 – Choose directors or members/managers
• Step 4 – File Articles of Organization
• Step 5 – Apply for S Corp status with IRS Form 2553

S-Corp Election Steps for Corporations

For detailed formation steps, see our Alaska Corporation formation guide.

• Step 1 – Choose a name
• Step 2 – Appoint directors
• Step 3 – Choose an Alaska registered agent
• Step 4 – File the Alaska Certificate of Incorporation
• Step 5 – Create Corporate bylaws
• Step 6 – Draft a shareholder agreement
• Step 7 – Issue shares of stock
• Step 8 – Apply for necessary business permits and licenses
• Step 9 – File for an EIN
• Step 10 – Submit your annual report
• Step 11 – Apply for S Corp status with IRS Form 2553

File Form 2553 to Turn Business into an S Corporation

Finally, you’re ready to turn your business into an S Corporation. You will do so by making what’s called an S Corp election.

To make the election, you file Form 2553 with the IRS. This form is what officially changes the entity’s classification to an S Corp. For LLCs, however, you must first change your entity classification to Corporation status by filing IRS Form 8832 before filing your Form 2553. 

Additionally, don’t forget to get an Employer Identification Number (EIN) for your business. Not sure how to get started? We can help you obtain one from the IRS today with our EIN Service.

Weighing the pros and cons of creating an S Corporation

Like many business entities, an S Corp designation has its pros and cons. Take a look at them below and weight them before deciding if an S Corp election is right for your business.

The pros of an S Corp

In addition to pass-through taxation, some of the most common advantages of creating an S Corporation include: 

• Improved asset protection
• Cash method of accounting
• Tax-favorable characterization of income

The cons of an S Corp

As with most things, there are certain cons to take note of as well. For example, common disadvantages associated with forming an S Corporation include: 

• Closer IRS scrutiny
• Less flexibility in allocating income and losses
• Higher formation and maintenance expenses
• More stringent tax qualification obligations
• Stock ownership restrictions

Thus, before setting your entity up as an S Corp, carefully consider these pros and cons. This will help you determine whether an S Corporation classification meets the needs and goals of your business. If you’re still not sure if an S Corp classification is right for your Alaska business, be sure to consult an experienced business lawyer to discuss your options in more detail. 

What to know before creating an S Corporation in Alaska

At the time of formation, the default for a business entity is classification as a C Corporation. Thus, if you want your business to be set up as an S Corp, you’ll have to actively change its status. 

Of course, forming an S Corp may not be the right move for all businesses. Thus, before deciding whether to make this election, there are a few important things you should know. 

What’s the difference between an S Corporation and a C Corporation?

Again, the default classification for a corporation at the time of formation is as a C Corp. Notably, C Corps must file and pay taxes on their corporate income at the entity level in addition to the shareholder level on each individual’s income taxes. Thus, while S Corps benefit from pass-through taxation, C Corps do not. 

However, although C Corps can’t avoid double taxation, they do benefit from greater flexibility and less stringent requirements in the formation process. 

What are the requirements to create an S Corporation? 

To create an S Corporation, you must first form a business that falls within the limitations identified above. Then, you have to file Form 2553 with the IRS within one of the timeframes listed above.