Federal requirements address matters such as the type and number of shareholders, permissible shareholders, stock classes, and domestic status. Eligibility should be checked against current IRS requirements before making an election.

An S corporation should be explained as a federal tax classification rather than simply another state entity type. A qualifying corporation or LLC can seek S corporation tax treatment by making the required federal election. The entity must satisfy eligibility rules, and the underlying state-law entity continues to exist as the corporation or LLC that was formed with the state.