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An S Corporation is not a type of business entity. It is a federal tax classification available to qualifying corporations and LLCs that elect to have their business income pass through to shareholders for tax purposes.
The S Corp designation is governed by Subchapter S of the Internal Revenue Code. When you elect S Corp status, the business itself generally does not pay federal income tax. Instead, income, losses, deductions, and credits flow through to shareholders, who report them on their personal returns.[13]
In North Dakota, an S Corporation files Form 60, the North Dakota S Corporation Income Tax Return. North Dakota does not impose its graduated corporate income tax on S Corps. That corporate tax, which runs from 1.41% to 4.31%, applies to C Corporations only. S Corp income instead passes through to shareholders.[1] [6]
North Dakota is one of the most tax-friendly states for S Corp shareholders. The state uses a three-bracket individual income tax of 0%, 1.95%, and 2.50%, with a top rate of just 2.50%. That means the personal tax bill on pass-through income is among the lowest of any state with an income tax.[14]
For business owners earning $60,000 or more in net business income, the S Corp election can provide meaningful self-employment tax savings. Only the salary you pay yourself as a W-2 employee is subject to Social Security and Medicare taxes; distributions beyond reasonable compensation are not.
| Action | Deadline | Notes |
|---|---|---|
| File IRS Form 2553 | Within 2 months and 15 days after the start of the tax year | For a January 1 tax year, the deadline is March 15. Late election relief may be available under IRS Rev. Proc. 2013-30.[3] |
| File Form 60 (North Dakota) | April 15 (calendar-year filers) | Due the 15th day of the 4th month after the close of the tax year. Form 60 reports North Dakota S Corp income.[7] |
| File Form 1120-S (Federal) | March 15 (calendar-year filers) | Distribute Schedule K-1s to shareholders.[3] |
| File Form 60 extension | By the original April 15 due date | North Dakota honors the federal extension. An extended Form 60 is due September 15 for calendar-year filers. Any tax owed is still due April 15.[7] |
| Pay nonresident withholding | With Form 60 when filed | The S Corp withholds 2.5% on a nonresident shareholder’s North Dakota distributive share unless an exemption applies.[9] |
| Register for unemployment insurance | Within 20 days of first employing workers | Register with Job Service North Dakota for unemployment insurance tax before running payroll.[11] |
| File Annual Report (corporation) | August 1 each year | Filed with the North Dakota Secretary of State. A late filing triggers a penalty and can lead to involuntary dissolution.[5] |
An S Corp is a tax classification, not a standalone entity. You must have an active North Dakota corporation or LLC on file with the Secretary of State before you can elect S Corp tax treatment with the IRS.
If you want to form an LLC first, check this guide.
If you want to incorporate as a C Corp first, check this guide.
Already have an existing LLC or corporation? Move to Step 1.
Form 2553, Election by a Small Business Corporation, is the IRS form that officially elects S Corp tax treatment at the federal level. It must be filed no later than 2 months, and 15 days after the beginning of the tax year, the election is to take effect. For a calendar-year corporation electing S Corp status for 2026, the deadline is March 15, 2026.[3]
Form 2553 collects the following information:
All shareholders must sign the consent portion of the form before submission. An unsigned form will be rejected by the IRS.
You can submit Form 2553 by mail or fax. There is no filing fee.
If your principal business office is located in North Dakota, mail Form 2553 to: Department of the Treasury, Internal Revenue Service, Ogden, UT 84201.[8]
Fax number for North Dakota businesses: 855-214-7520.[8]
Faxing is typically faster than mailing. Keep your fax confirmation receipt. The IRS will issue a CP261 acceptance notice to confirm your S Corporation election.
North Dakota follows the federal S Corp classification automatically. Once your federal Form 2553 is accepted, North Dakota will treat your business as an S Corp for tax purposes when you file Form 60. There is no separate North Dakota election form to submit.[1]
After your federal acceptance, keep a copy of your IRS CP261 acceptance letter with your records to support your first Form 60 filing.
As an S Corp shareholder-employee, you are required to pay yourself a reasonable salary through W-2 payroll. The IRS scrutinizes S Corps that pay unreasonably low salaries to avoid payroll taxes.
The IRS expects your salary to reflect what someone performing similar work, in the same industry and the same region, would typically earn. There is no fixed formula, but the IRS flags S Corps where compensation is well below market and most of the owner’s pay comes through distributions.
Setting your salary too low risks the IRS reclassifying distributions as wages, making them subject to payroll taxes plus penalties and interest.
If you do not already have an EIN, apply at no charge on the IRS website (irs.gov). An EIN is a nine-digit federal ID used for tax filings, hiring employees, and opening business accounts.
Note: After obtaining your EIN, open a dedicated business bank account to keep your personal and business finances separate. This is essential to maintain your limited liability protection.
Every North Dakota business corporation must file an annual report with the Secretary of State by August 1 each year, starting the year after incorporation. Reports are filed through the FirstStop online portal. Missing the deadline triggers a penalty and can lead to involuntary dissolution of the corporation.[5]
File IRS Form 1120-S and distribute Schedule K-1s to all shareholders by March 15 (calendar-year filers). File North Dakota Form 60 by April 15, the 15th day of the 4th month after the close of the tax year.[7] [9]
North Dakota honors the federal extension. If you obtain a federal extension, the extended Form 60 is due September 15 for calendar-year filers. An extension to file is not an extension to pay; any North Dakota tax owed is still due by April 15.[7]
A North Dakota S Corp must withhold 2.5% North Dakota income tax on a nonresident shareholder’s year-end distributive share of North Dakota income. The withholding is paid in full with Form 60. A nonresident may instead join a composite filing or claim an exemption using Form PWA or Form PWE.[9]
North Dakota charges a penalty and interest on Form 60 returns filed or paid late. To avoid penalties, file Form 60 and pay any balance due by the April 15 deadline, or by the extended September 15 date if a valid extension is in place. Confirm current penalty amounts in the Form 60 instructions.[9]
If you fail to file Form 2553 with the IRS on time, your S Corp election will not take effect for the current tax year. Your business will be taxed as a C Corporation, or as a sole proprietorship or partnership if the underlying entity is an LLC, for that year. That costs you the self-employment tax savings until the next tax year.
The IRS offers late election relief under Revenue Procedure 2013-30. To qualify, you must file within 3 years and 75 days of the intended effective date, demonstrate reasonable cause for the late filing, and confirm that the entity has consistently filed as if the S election were in effect.[3]
Because North Dakota follows the federal S election automatically, there is no separate state late-election process. Once the IRS grants late election relief, North Dakota will treat the entity as an S Corporation for the same tax year and accept Form 60.[1]
At the federal level, the S Corp election can be revoked by filing a statement of revocation with the IRS, signed by shareholders holding more than 50% of the outstanding shares. The revocation is effective the first day of the tax year if filed by the 15th day of the third month; later filings take effect the following tax year.[3]
Because North Dakota follows the federal classification, a federal revocation automatically terminates the North Dakota S Corp status. The entity then files as a C Corporation on North Dakota Form 40 for tax years beginning after the federal revocation. Once revoked, you generally cannot re-elect S Corp status for five years without IRS consent.[1]
North Dakota S Corps are not subject to the state corporate income tax. That graduated tax applies to C Corporations only. North Dakota S Corp income passes through to shareholders and is taxed on their personal returns.[1] [6]
| North Dakota Taxable Income | Corporate Tax Rate |
|---|---|
| First $25,000 | 1.41%[6] |
| $25,000 to $50,000 | 3.55%[6] |
| Over $50,000 | 4.31%[6] |
| S Corporation income | Not taxed at the entity level; passes through to shareholders[1] |
North Dakota has not enacted an elective Pass-Through Entity (PTE) tax. It is one of the few states with a broad income tax that does not offer an entity-level election to work around the federal $10,000 SALT deduction cap. North Dakota S Corp owners deduct state taxes only on their personal returns, subject to the federal SALT cap.[1]
North Dakota taxes a shareholder’s pro rata share of S Corp pass-through income on the individual return using a three-bracket structure of 0%, 1.95%, and 2.50%. The top rate of 2.50% is one of the lowest in the country. Nonresident shareholders are taxed only on the share derived from North Dakota sources, with 2.5% withholding reported on Form 60.[14] [9]
North Dakota imposes a 5% state sales and use tax on most retail sales of tangible personal property. Cities and counties may add local sales taxes on top of the state rate. Businesses selling taxable goods or services must register for a sales tax permit with the North Dakota Office of State Tax Commissioner.[10]
| Item | Cost |
|---|---|
| Articles of Incorporation (corporation) | $100[2] |
| Articles of Organization (LLC) | $135[5] |
| IRS Form 2553 filing | No fee[3] |
| Federal EIN (Form SS-4) | No fee |
| Corporation Annual Report | Filed with the Secretary of State by August 1[5] |
| LLC Annual Report | $50, due November 15[5] |
| Registered Agent service (typical commercial) | $100 to $300 per year |
| Optional: expedited filing service | Varies by provider[2] |
| Feature | S Corporation | LLC |
|---|---|---|
| Formation Document | Articles of Incorporation ($100) | Articles of Organization ($135) |
| Federal Tax Treatment | Pass-through (Form 1120-S) | Pass-through by default (Form 1065 or Schedule C) |
| North Dakota Tax Treatment | Form 60; no entity income tax | Form 58 or no return (disregarded) |
| Annual Report | Due August 1 | Due November 15 ($50) |
| Self-Employment Tax | Only on W-2 salary | 15.3% on all net earnings |
| Ownership Limits | Max 100 U.S.-person shareholders, one class of stock | Unlimited members, any type |
| Management | Directors and officers required | Flexible; member or manager managed |
| Reasonable Salary Required | Yes | No |
| Shareholder Tax Rate | Up to 2.50% North Dakota individual rate | Up to 2.50% North Dakota individual rate |
| Best For | Owners earning $60K+ wanting SE-tax savings | Small businesses prioritizing simplicity |
The S Corp election makes the most financial sense when your net business income is high enough that the self-employment tax savings outweigh the cost of running payroll and the additional compliance burden. Use this guide:
| Net Business Income | Recommendation |
|---|---|
| Under $40,000 | An S Corp likely does not make sense. Payroll and compliance costs typically erase the savings. |
| $40,000 to $60,000 | Borderline. Run the numbers with a CPA. Savings may be modest after payroll-service fees. |
| $60,000 to $100,000 | S Corp election usually saves $2,000 to $5,000 per year in self-employment taxes. |
| $100,000 to $200,000 | Strong candidate. Savings often $5,000 to $10,000 or more per year. |
| Over $200,000 | Almost always advantageous unless you have specific reasons such as foreign investors or IPO plans to remain a C Corp or LLC. |
Keep in mind that North Dakota’s annual report fees, payroll setup costs, and ongoing CPA fees together add roughly $800 to $2,500 in annual costs. S Corps also have ownership restrictions that may not suit every business model.
| Requirement | Details |
|---|---|
| Form 1120-S (Federal) | Due March 15. Reports S Corp income. Distribute K-1s to shareholders. |
| Form 60 (North Dakota) | Due April 15. Reports North Dakota S Corp income and issues Schedule K-1 to shareholders.[9] |
| Annual Report (corporation) | Filed with the North Dakota Secretary of State by August 1 each year.[5] |
| Form 941 (Federal Payroll Tax) | Filed quarterly. Reports federal income tax, Social Security, and Medicare withheld. |
| North Dakota Withholding Returns | State income tax withholding returns filed with the Office of State Tax Commissioner.[12] |
| Unemployment Insurance Reports | Quarterly contribution and wage reports filed with Job Service North Dakota.[11] |
| W-2s and 1099s | Distributed by January 31. Filed with the IRS, the Social Security Administration, and North Dakota. |
| Nonresident Withholding | 2.5% withholding on a nonresident shareholder’s North Dakota share, paid with Form 60.[9] |
| Registered Agent Maintenance | Keep a registered agent with a physical North Dakota address on file with the Secretary of State.[4] |
[1] North Dakota Office of State Tax Commissioner. S Corp and Partnership Tax. Accessed May 20, 2026.
[2] North Dakota Secretary of State. Corporation Business Structure and Filing Fees. Accessed May 20, 2026.
[3] IRS. Instructions for Form 2553. Accessed May 20, 2026.
[4] North Dakota Legislative Branch. North Dakota Century Code Chapter 10-19.1 (Business Corporation Act). Accessed May 20, 2026.
[5] North Dakota Secretary of State. Maintain Registration (Annual Reports). Accessed May 20, 2026.
[6] North Dakota Office of State Tax Commissioner. Corporate Income Tax. Accessed May 20, 2026.
[7] North Dakota Office of State Tax Commissioner. S Corp and Partnership Tax Deadlines. Accessed May 20, 2026.
[8] IRS. Where to File Your Taxes (for Form 2553). Accessed May 20, 2026.
[9] North Dakota Office of State Tax Commissioner. 2025 Form 60, S Corporation Income Tax Return. Accessed May 20, 2026.
[10] North Dakota Office of State Tax Commissioner. Sales and Use Tax. Accessed May 20, 2026.
[11] Job Service North Dakota. Employer’s Guide to Unemployment Insurance Tax. Accessed May 20, 2026.
[12] North Dakota Office of State Tax Commissioner. Income Tax Withholding. Accessed May 20, 2026.
[13] IRS. S Corporations. Accessed May 20, 2026.
[14] North Dakota Office of State Tax Commissioner. Individual Income Tax. Accessed May 20, 2026.
