To elect to be taxed as an S-Corporation, a Corporation or an LLC must file form 2553. The election permits the income of the S-Corporation to be taxed to the shareholders of the corporation or members of the LLC rather than to the corporation itself. A corporation or LLC may elect to be taxed as an S-Corporation only if it meets all of the following tests:

• It is a domestic (United States) Entity
• Its only shareholders or members are individuals
• It has no Non-Resident Alien Shareholders or Members
• It has only one class of stock

Additionally, the IRS has an expectation that at least one employee will be become an "employee" and receive W-2 earnings.