Filing an S corp in Texas is a two-step process: you form a corporation or LLC with the Texas Secretary of State for a $300 fee, then you elect S corporation tax treatment with the IRS by filing Form 2553. S corp status is a federal tax classification, not a Texas entity type. Your business stays a Texas corporation or LLC under state law, but the IRS treats it as a pass-through, so profits flow to shareholders’ individual returns instead of being taxed at the corporate level.
Confirm Your Business Can Qualify
Before you spend anything, check that your company meets the federal S corp rules in 26 U.S.C. § 1361. A business must satisfy all of them:
- Be a domestic corporation. Foreign entities don’t qualify.
- Have 100 or fewer shareholders. Family members can elect to be counted as one.
- Have only eligible shareholders: individuals, certain trusts, or estates. Partnerships, other corporations, and nonresident aliens cannot hold shares.
- Have one class of stock. Voting rights can differ, but rights to distributions and liquidation proceeds must be identical.
- Not be an ineligible corporation, which excludes certain financial institutions, insurance companies, and domestic international sales corporations.
The one-class-of-stock rule catches more owners than any other. Preferred shares that give an investor a priority claim on profits will disqualify you. Straight shareholder loans generally don’t count as a second class of stock, but any arrangement that hands one owner a larger share of distributions than their ownership percentage deserves a careful look.1Office of the Law Revision Counsel. 26 U.S. Code 1361 – S Corporation Defined
If you’re forming an LLC rather than a corporation, the same rules apply. The LLC must be classified as a corporation for federal tax purposes. You can do that by filing Form 8832 first, or you can make both elections at once by checking a box on Form 2553 indicating the entity hasn’t filed Form 8832.2Internal Revenue Service. S Corporations
Step One: Form the Texas Entity
S corp status rides on top of an existing legal entity, so you start by creating one with the Texas Secretary of State. Corporations file a Certificate of Formation on Form 201. LLCs file Form 205. The fee is $300 either way.
Pick a Name That Clears the Register
Your entity name must be distinguishable from every other business name on file. Corporations need a suffix such as Corporation, Incorporated, Company, or an abbreviation. LLCs need Limited Liability Company or LLC. Check availability through the Secretary of State’s SOSDirect portal before you file.3Office of the Texas Secretary of State. Name Filings FAQs
What Goes on the Formation Document
Form 201 asks for the total number of authorized shares and either a stated par value or a declaration that shares have no par value. You list at least one initial director by name and address. The default purpose statement, conducting any lawful business, works for most companies. An organizer signs the filing; the organizer is simply the person submitting it and doesn’t need to be a director or shareholder.4Office of the Texas Secretary of State. Form 201 – Instructions for Certificate of Formation – For-Profit Corporation
Form 205 asks whether the LLC will be managed by its members or by appointed managers. If manager-managed, list each initial manager. If member-managed, list each initial member. At least one governing person is required.5Office of the Texas Secretary of State. Form 205 – Instructions for Certificate of Formation – Limited Liability Company
Designate a Registered Agent
Every Texas entity must have a registered agent with a physical street address in the state where they can be personally served during normal business hours. The agent can be an individual Texas resident or another business authorized to operate in Texas. This isn’t optional, and letting the designation lapse creates administrative problems later.6Texas Public Law. Texas Business Organizations Code Section 5.201 – Designation and Maintenance of Registered Agent and Registered Office
Adopt Internal Governance Documents
The Certificate of Formation creates the entity, not the rules for running it. Corporations should adopt bylaws covering meetings, officer roles, and voting. LLCs should have a written company agreement setting out each member’s ownership percentage, profit-sharing, and management duties. Texas law allows an LLC’s company agreement to be oral or implied, but the IRS expects clear ownership documentation for an S corp election, so a written agreement is the practical choice.
Submit and Get an EIN
You can file electronically through SOSDirect or mail paper documents to the Austin office. Electronic filings process faster. The $300 fee is paid at submission, and the Secretary of State won’t accept a filing without payment.7the Texas Secretary of State. Filing and Other General FAQs Electronic filings typically confirm within a few business days. Once your entity exists, apply for an Employer Identification Number through the IRS. You’ll need it for Form 2553, and the online application returns an EIN immediately.8Texas Secretary of State. Formation of Texas Entities FAQs
Step Two: File Form 2553 With the IRS
Form 2553 is the document that actually gives your business S corp tax treatment. It asks for your EIN, the entity’s exact legal name as it appears on the Certificate of Formation, and the date and state of incorporation. Every shareholder provides their name, address, Social Security number, ownership percentage, and the date they acquired shares.9Internal Revenue Service. Form 2553 – Election by a Small Business Corporation
Every shareholder must sign a consent statement on the form or on a separately attached statement. A missing signature from even one shareholder can invalidate the election and leave your company taxed as a C corporation. Most small businesses pick a calendar year ending December 31 as their tax year.10Internal Revenue Service. Instructions for Form 2553
When to File
You can file Form 2553 during the tax year before the one you want S corp status to begin, or no later than two months and 15 days into the tax year itself. For a calendar-year business that wants S corp status starting January 1, that means filing by March 15 of that year. For a brand-new company, the clock starts on the earliest of the date the corporation had shareholders, acquired assets, or began doing business.11GovInfo. 26 U.S. Code 1362 – Election, Revocation, Termination
If you file after that window but before the 15th day of the third month of the following tax year, the election automatically applies to the next tax year instead.
Where to Send It
Texas-based businesses mail Form 2553 to the Department of the Treasury, Internal Revenue Service, Ogden, UT 84201. You can also fax it to 855-214-7520 and keep the original in your permanent records.12Internal Revenue Service. Where to File Your Taxes for Form 2553 The IRS generally sends a determination letter within 60 days. If you requested a non-standard tax year, expect an additional 90 days.10Internal Revenue Service. Instructions for Form 2553
If You Missed the Deadline
Missing the window doesn’t force you to wait until next year. Revenue Procedure 2013-30 provides a streamlined relief process if your company intended to be an S corp from the start and simply failed to file on time. To qualify, you must file within three years and 75 days of the intended effective date, show reasonable cause for the delay, and confirm that the company and all shareholders reported income consistently with S corp treatment for every affected year.13Internal Revenue Service. Revenue Procedure 2013-30
Every shareholder who held stock between the intended effective date and the filing date must sign the late Form 2553 and include a statement confirming they reported income as if the election had been in place. If you meet the conditions, you write “FILED PURSUANT TO REV. PROC. 2013-30” at the top of the form and the IRS treats it as timely. Beyond three years and 75 days, relief is still possible under 26 U.S.C. § 1362(b)(5) if reporting has been consistent, but the process involves more scrutiny.
What You Take On Once You’re an S Corp
The filing is the easy part. Running an S corp brings ongoing obligations you should know before you elect.
Reasonable Compensation
The tax advantage of an S corp is that distributions to shareholders aren’t subject to Social Security and Medicare taxes the way salary is. The IRS knows this and draws a firm line: if you work in the business, you must pay yourself a reasonable salary before taking any distributions.14Internal Revenue Service. S Corporation Employees, Shareholders and Corporate Officers Shareholder-employees who take large distributions with little or no wages routinely lose in court, with distributions reclassified as wages plus back employment taxes and penalties. What counts as reasonable depends on what someone with your skills and responsibilities would earn in a comparable role. There is no safe-harbor percentage. Once you’re paying salary, the S corp handles employment taxes like any other employer: withholding federal income tax, Social Security, and Medicare, filing Form 941 quarterly, and paying federal unemployment tax on Form 940.2Internal Revenue Service. S Corporations
Texas Franchise Tax and Public Information Report
Texas doesn’t recognize the S election for franchise tax purposes. Your entity owes franchise tax based on total revenue regardless of federal classification.15Texas Comptroller. Franchise Tax Overview For the 2026 report year, businesses with annualized total revenue at or below $2.65 million owe no franchise tax.16Texas Comptroller. Texas Franchise Tax Report Forms for 2026 Even below that threshold, you still file a Public Information Report annually. Both are due May 15.17Texas Comptroller of Public Accounts. Texas Franchise Tax Public Information Report and Ownership Information Report Missing the deadline brings a $50 penalty per late report, a 5% penalty on tax owed if paid within 30 days of the due date and 10% after that, and interest starting 61 days after the due date. Persistent non-filing can lead to forfeiture of your right to do business in Texas.18Texas Comptroller. Franchise Tax
Form 1120-S Every Year
Every S corporation files Form 1120-S with the IRS annually. The form reports income, deductions, gains, losses, and credits, and produces Schedule K-1s allocating each item to individual shareholders, who report their share on their personal returns.19Internal Revenue Service. Instructions for Form 1120-S (2025) For calendar-year S corporations, Form 1120-S is due March 15. In 2026, that date falls on a Sunday, so the deadline shifts to March 16. Filing late without an extension triggers penalties of $235 per shareholder per month or part of a month. Form 7004 gets you an automatic six-month extension of the filing deadline, but it does not extend the time for shareholders to pay any tax owed on Schedule K-1 items.