How Do I Convert My LLC to an S-Corp in Delaware?

Quick Answer

Delaware LLCs cannot formally convert to S-Corps through state law. Instead, elect S-Corp federal tax treatment by filing IRS Form 2553 while keeping your LLC legal structure intact under 6 Del. C. § 18-1107. Your LLC remains an LLC for Delaware purposes but is taxed as an S-Corp federally. No state filing is required.

Federal Tax Election Process

File Form 2553 (Election by a Small Business Corporation) with the IRS to elect S-Corp taxation. This is a federal election only—Delaware automatically recognizes it. The election becomes effective on the date you designate (typically the first day of the tax year or within 2 months and 15 days of LLC formation).

Your LLC's legal structure doesn't change. You remain a Delaware limited liability company filing annual reports and paying the $300 franchise tax by June 1 each year under 6 Del. C. § 18-1107.

Tax Impact

Self-Employment Tax Savings

As an S-Corp, you split income between W-2 wages (subject to 15.3% self-employment tax) and distributions (not subject to self-employment tax). This can reduce overall self-employment liability compared to default partnership taxation for multi-member LLCs.

Delaware State Taxes Unchanged

Your $300 annual franchise tax continues regardless of federal election. Delaware's graduated personal income tax (2.2%–6.6%) applies to your pass-through share of income. If operating in Delaware, you remain subject to gross receipts tax (approximately 0.0945%–1.9914% depending on industry).

Ongoing Compliance

Pay franchise tax by June 1 annually or face a $200 penalty plus 1.5% monthly interest. Three consecutive years of nonpayment triggers automatic dissolution under 6 Del. C. § 18-1108. File estimated federal taxes quarterly (April 15, June 15, September 15, January 15) based on your new S-Corp income allocation.

Next Steps

Consult a CPA or tax attorney to confirm S-Corp election benefits your situation
Obtain and file Form 2553 with the IRS (not Delaware)
Continue paying Delaware's $300 annual franchise tax by June 1
Update payroll and accounting systems for S-Corp treatment

Contact the Delaware Division of Revenue at https://revenue.delaware.gov/ for state-specific questions.

This is general information, not legal advice.