How to Convert Your S Corporation to a C Corporation on Your Own

You can convert your S Corporation to a C Corporation by revoking your S election with the IRS. The process doesn't require forming a new entity — your business is already a corporation. You're changing how it's taxed. Here's when that switch makes sense and exactly how to do it.

Converting from an S Corp to a C Corp makes sense when your business has outgrown the restrictions that come with S Corp status, or when the corporate tax rate works in your favor. Not every business reaches this point, but a few situations make the switch worth considering.

Your business income has grown past the S Corp tax advantage

S Corps benefit from pass-through taxation, which means profits flow to your personal return and avoid corporate-level tax. But the Tax Cuts and Jobs Act of 2017 set the federal corporate tax rate at a flat 21%. For businesses earning well above the qualified business income deduction threshold, that flat rate can be more favorable than pass-through treatment. A tax professional can help you figure out which structure saves more at your income level.

You've hit the S Corp shareholder ceiling

S Corps can't have more than 100 shareholders, can't include foreign owners, and are limited to a single class of stock. If you're raising outside capital, bringing on international investors, or planning to offer different share classes to different investor groups, those restrictions will stop you cold. A C Corp removes all three limits.

You need to attract investors who want more flexibility

Venture capital firms and institutional investors typically won't invest in an S Corp because of the shareholder restrictions. C Corps can issue preferred stock, common stock, and other share classes — which gives investors the deal structures they expect. If you're planning a funding round, converting first is often a prerequisite.

To convert your S Corp to a C Corp, you revoke the S election by filing a statement with the IRS. Your corporation doesn't change — only the tax classification does. The process is straightforward, but the timing and shareholder consent requirements matter.

Step 1: Get shareholder consent

Shareholders holding more than 50% of the corporation's stock must consent to the revocation in writing before you file. Collect signed consent statements from each consenting shareholder and keep them with your corporate records. You'll need to include this consent with your revocation filing.

Step 2: Prepare and file the revocation statement

Write a revocation statement that includes the corporation's name, address, and Employer Identification Number (EIN), a clear statement that the S election is being revoked, the intended effective date, and the signatures of the consenting shareholders. File this statement with the IRS Service Center where you file your annual return. There's no separate IRS form for the revocation itself — the written statement is the filing.

Step 3: Time the revocation carefully

Timing affects which tax year the conversion takes effect. If you want the C Corp status to apply to the current tax year, the IRS must receive your revocation statement by the 15th day of the third month of that tax year. File after that date and the revocation takes effect at the start of the following tax year. Most business owners find it cleaner to time the switch to the beginning of a new tax year — it avoids splitting a year between two tax regimes.

Step 4: Understand the 5-year restriction

Once you voluntarily revoke your S election, you can't elect S Corp status again for 5 years from the effective date of the revocation. This is a hard rule under IRC Section 1362(g). Make sure the conversion is the right long-term decision before you file — this isn't something you can easily undo.

Converting to a C Corp changes how your business is taxed at every level. The most important shift is double taxation — corporate profits are taxed at the 21% federal corporate rate, and any dividends distributed to shareholders are taxed again on their personal returns. That's a real cost, and it's worth modeling out before you convert.

Plus, if your S Corp holds assets that have appreciated in value, watch out for the built-in gains tax. Under IRC Section 1374, if you sell those assets within 5 years of converting, the gains that existed at the time of conversion are taxed at the corporate rate. This catches a lot of business owners off guard — talk to a tax professional before you convert if your business holds real estate, intellectual property, or other appreciated assets.

• C Corp profits are taxed at 21% at the corporate level before any distributions to shareholders
• Shareholder dividends are taxed again on personal returns — this is the double taxation trade-off
• Appreciated assets sold within 5 years of conversion may trigger the built-in gains tax under IRC Section 1374
• After conversion, file Form 1120 (U.S. Corporation Income Tax Return) instead of Form 1120-S

Once the IRS processes your revocation and your S election is terminated, your business operates as a C Corp. The day-to-day doesn't change much, but your tax and compliance obligations do. A few things to take care of right away.

Switch to C Corp tax filings

You'll file Form 1120 going forward instead of Form 1120-S. Your first C Corp return will cover the period from the effective date of your conversion through the end of the tax year. If the conversion happened mid-year, you may need to file a short-year S Corp return for the period before the conversion and a short-year C Corp return for the period after. A CPA who works with corporations can help you figure out the right approach for your situation.

Update your corporate records and agreements

Review your shareholder agreements, bylaws, and any stock certificates to make sure they reflect C Corp structure. If you're planning to issue new share classes or bring on new investors, update those documents before you do. Some states may also require you to file an amended certificate of incorporation or a notice of election change — check with your state's Secretary of State office.

Build a plan for what the C Corp structure makes possible

The reason most businesses convert is to unlock something — more investors, more share classes, more capital. Now that you have the structure, put together a concrete plan for how you'll use it. That might mean drafting a term sheet for a funding round, restructuring equity for a new partner, or simply revisiting your business plan with the new tax reality in mind. The conversion is the easy part. What you do with it is what matters.