The decision to revoke an S-Corp election is not a compliance task; it is a strategic pivot. For the elite global professional, it signals a deliberate shift away from a structure designed for simplicity toward one built for scale, international reach, and high-value exits. This is not about paperwork—it is about aligning your corporate architecture with the full scope of your ambition.
This guide moves beyond mere procedure to focus on the critical triggers for revocation, the flawless execution of the process, and the essential first steps in your new operational reality.
An S-Corp election should be revoked not as a reaction, but as a proactive move to unlock future opportunities. For the global professional, several distinct scenarios elevate this decision from a theoretical option to an absolute necessity.
Once the strategic decision is made, the focus shifts from "why" to a flawless "how." A misstep in the IRS procedure can lead to costly delays or rejection. This methodical process ensures your revocation is accepted without issue, giving you complete control over your corporate transition.
Before notifying the IRS, you must formalize the decision internally. The revocation requires consent from shareholders holding more than 50% of the company's stock, including both voting and non-voting shares. This is a formal corporate act, not a casual conversation.
Document this approval in a signed Shareholder Consent Resolution. This internal document is a critical piece of your corporate records, providing a clear paper trail that protects you from future disputes and demonstrates proper governance.
The IRS does not provide a specific form for this process. You must draft a formal revocation statement yourself. To avoid rejection, your statement must contain the following key information:
Attach the signed Shareholder Consent Resolution from Step 1 to this formal statement.
How you send your revocation is as important as what it contains. To create an irrefutable record of a timely filing, send the complete package to the IRS service center where you file your annual return using Certified Mail with Return Receipt. This service provides a postmarked receipt—legal proof of the mailing date—and a signature confirmation when the IRS receives it. This simple step eliminates any anxiety about missed deadlines or lost mail.
Timing dictates the effective date of your revocation. To make the change effective for the entire current tax year (retroactive to January 1st for calendar-year businesses), you must file your statement by the 16th day of the third month of that tax year—typically March 15th.
Filing the paperwork is not the final move—it is the beginning of a new operational reality. The following 90-day plan ensures your strategic decision translates into seamless execution.
The moment your revocation is effective, your business has a new default tax status, fundamentally altering how profits are taxed.
Your old compensation habits are now a liability. The S-Corp strategy of taking a modest salary and large, tax-advantaged distributions is over.
The most significant mistake owners make post-revocation is failing to switch from a distribution-focused model to a reasonable salary structure. They continue taking owner draws, not realizing those are now non-deductible dividends from a C-Corp, leading to double taxation.
In a C-Corp, profits are taxed once at the corporate level and again at the personal level when distributed as dividends. To manage this, you must immediately adjust your compensation.
Your duty to inform extends beyond the IRS. Update key stakeholders and platforms to align with your new structure.
What is the deadline to revoke S-Corp status for the current tax year?
For a calendar-year business, the revocation statement must be filed by March 15th to be effective retroactively to January 1st of that year. If filed after that date, the revocation takes effect on the first day of the next tax year, unless you specify a different prospective date.
Can you retroactively revoke an S-Corp election for a prior year?
No. The IRS does not permit revoking an S-Corp election for a tax year that has already ended. The only retroactive provision is the one allowing a revocation filed by March 15th to apply to the current year. All decisions must be forward-looking.
Who must approve an S-Corp revocation?
A voluntary revocation requires formal consent from shareholders holding more than 50% of the corporation's total outstanding stock, including both voting and non-voting shares. This consent must be documented in a formal resolution.
What tax form is used to revoke an S-Corp election?
There is no specific numbered IRS form. You must submit a formal, signed revocation statement—essentially a detailed letter—to the IRS containing all required corporate and shareholder information, along with the effective date.
What happens to an LLC after revoking its S-Corp election?
An LLC reverts to its default IRS tax classification. A multi-member LLC reverts to being taxed as a Partnership, while a single-member LLC reverts to a "disregarded entity" (taxed as a sole proprietorship). It does not automatically become a C-Corporation.
How long must I wait to become an S-Corp again?
Due to the five-year rule, a corporation that revokes its S-Corp status must generally wait five taxable years before it can re-elect. This makes the decision a significant long-term commitment that should be made with strategic certainty.
Viewing the S-Corp revocation purely through a lens of compliance is a mistake. It is not about avoiding penalties; it is about seizing control. The choice to revoke your S-Corp election is one of the most powerful strategic levers you can pull to shape the future of your enterprise, signaling a deliberate shift from a domestic-focused structure to one engineered for global ambition.
A reactive owner sees corporate structure as a box. A strategic architect understands it must be engineered to support the weight of their goals. The S-Corp’s limitations—its cap on shareholders and prohibition of foreign or corporate investors—are foundational weaknesses when your objective is to attract venture capital or position for a strategic acquisition. Proactively revoking your S-Corp status is not a reaction to a term sheet; it is the deliberate preparation of your company’s foundation to welcome that level of opportunity.
This decision is a declaration of intent. It is a forward-looking move that anticipates future needs for capital, prepares your entity for a lucrative exit, or aligns your corporate finances with the realities of a life lived across borders. By wielding corporate governance as a competitive advantage, you are no longer just a business owner following rules; you are the architect of your enterprise, making informed, confident decisions that empower your global future.
A certified financial planner specializing in the unique challenges faced by US citizens abroad. Ben's articles provide actionable advice on everything from FBAR and FATCA compliance to retirement planning for expats.
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