<P> An S corporation may only have one class of stock . A single class of stock means that all outstanding shares of stock confer "identical rights to distribution and liquidation proceeds," i.e. profits and losses are allocated to shareholders proportionately to each one's interest in the business . § 1.1361 - 1 (l) (1). Differences in voting rights are disregarded, which means that an S corporation may have voting and nonvoting stock . </P> <P> If a corporation meets the foregoing requirements and wishes to be taxed under Subchapter S, its shareholders may file Form 2553: "Election by a Small Business Corporation" with the Internal Revenue Service (IRS). The Form 2553 must be signed by all of the corporation's shareholders . If a shareholder resides in a community property state, the shareholder's spouse generally must also sign the 2553 . </P> <P> The S corporation election must typically be made by the fifteenth day of the third month of the tax year for which the election is intended to be effective, or at any time during the year immediately preceding the tax year . Congress has directed the IRS to show leniency with regard to late S elections . Accordingly, often, the IRS will accept a late S election . </P> <P> If a corporation that has elected to be treated as an S corporation ceases to meet the requirements (for example, if as a result of stock transfers, the number of shareholders exceeds 100 or an ineligible shareholder such as a nonresident alien acquires a share), the corporation will lose its S corporation status and revert to being a regular C corporation . </P>

When does s election have to be made