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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 Oregon, an S Corporation files Form OR-20-S, the Oregon S Corporation Tax Return. For Oregon tax purposes, S Corporation income is generally taxable to the shareholders rather than the corporation. The S Corp itself still owes a flat $150 Oregon minimum excise tax, and it pays Oregon tax on built-in gains or excess net passive income if that income is taxed on the federal S Corporation return.[1] [6]
Oregon also offers an elective Pass-Through Entity Elective tax (PTE-E), enacted by Senate Bill 727 of 2021. The election lets the entity pay Oregon income tax at the entity level, helping owners work around the federal $10,000 cap on the State and Local Tax deduction.[12]
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 OR-20-S (Oregon) | April 15 (calendar-year filers) | Oregon corporation returns are due the 15th day of the month after the federal due date. A calendar-year federal S Corporation return is due March 15, so the Oregon return is due April 15.[1] |
| File Form 1120-S (Federal) | March 15 (calendar-year filers) | Distribute Schedule K-1s to shareholders.[3] |
| Pay the $150 Oregon minimum tax | With the Form OR-20-S return | Every S Corporation doing business in Oregon owes the flat $150 minimum excise tax. It cannot be reduced by tax credits and does not pass through to shareholders.[7] |
| File the Oregon Corporate Activity Tax (CAT) return | April 15 (calendar-year filers) | Required only for businesses with more than $1 million in taxable Oregon commercial activity. The return is due the 15th day of the 4th month after the tax year ends.[10] |
| Make the PTE-E election | On a timely filed Form OR-21 for the tax year | Entities taxed as S Corporations may elect the Pass-Through Entity Elective tax annually. Estimated payments are due April 15, June 15, September 15, and January 15.[12] |
| File the Oregon Annual Report | On the entity anniversary date | Filed online with the Oregon Secretary of State. The renewal fee is $100 for both corporations and LLCs.[5] |
| Set up payroll | Before paying yourself a salary | Register with the Oregon Employment Department for unemployment insurance and with the Oregon Department of Revenue for payroll withholding before issuing W-2 wages.[11] |
An S Corp is a tax classification, not a standalone entity. You must have an active Oregon 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 Oregon, mail Form 2553 to: Department of the Treasury, Internal Revenue Service, Ogden, UT 84201.[8]
Fax number for Oregon 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.
Oregon follows the federal S Corp classification automatically. Once your federal Form 2553 is accepted, Oregon will treat your business as an S Corporation for tax purposes, and you file Form OR-20-S going forward. There is no separate Oregon 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 OR-20-S 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 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 Oregon corporation and LLC must file an annual report (the renewal) with the Secretary of State each year. The fee is $100, and the report is filed online by the entity anniversary date. A business that fails to renew on time becomes inactive and may eventually be administratively dissolved.[5]
File IRS Form 1120-S and distribute Schedule K-1s to all shareholders by March 15 (calendar-year filers). File Oregon Form OR-20-S by April 15, the 15th day of the month following the federal due date.[1] [3]
Oregon accepts a valid federal extension for the corporation return. The extension is an extension of time to file, not to pay. Any minimum tax or balance due is still owed by the original April 15 due date.[1]
An Oregon S Corporation must make estimated tax payments if its expected net tax is $500 or more for the year. S Corps that elect the PTE-E tax also make quarterly estimated payments toward the entity-level tax.[6] [12]
Oregon imposes interest and penalties on late-filed or late-paid corporation tax, including the $150 minimum tax. An annual report filed after the anniversary date can lead to an inactive status and eventual administrative dissolution with the Secretary of State.[1] [5]
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, costing 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 Oregon follows the federal S election automatically, there is no separate state late-election process. Once the IRS grants late election relief, Oregon will treat the entity as an S Corporation for the same tax year.[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 Oregon follows the federal classification, a federal revocation automatically terminates the Oregon S Corp status. The entity then files as a C Corporation on Form OR-20 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]
Every S Corporation carrying on or doing business in Oregon must pay a flat $150 minimum excise tax. Under ORS 317.090, an S Corporation minimum tax is set at $150 regardless of Oregon sales, while a C Corporation pays a tiered minimum tax that rises with Oregon sales. The minimum tax cannot be reduced by tax credits and does not pass through to shareholders.[7] [1]
| Entity Type and Oregon Sales | Minimum Tax |
|---|---|
| S Corporation (any Oregon sales) | $150 flat[7] |
| C Corporation, Oregon sales under $500,000 | $150[7] |
| C Corporation, $500,000 to under $1 million | $500[7] |
| C Corporation, $1 million to under $2 million | $1,000[7] |
| C Corporation, $5 million to under $7 million | $4,000[7] |
| C Corporation, $100 million or more | $100,000[7] |
Oregon C Corporations pay corporate excise tax measured by net income: 6.6% on the first $1 million of Oregon taxable income and 7.6% on the amount above $1 million. An S Corporation generally does not pay this graduated tax. It pays only the $150 minimum tax unless it has built-in gains or excess net passive income taxed on the federal S Corporation return.[1]
The Oregon Corporate Activity Tax is a gross-receipts tax imposed for the privilege of doing business in Oregon. It applies to S Corps and other entities with more than $1 million in taxable Oregon commercial activity. The tax is $250 plus 0.57% of taxable Oregon commercial activity above the $1 million threshold, and the CAT return is due April 15 for calendar-year filers.[10]
Oregon Senate Bill 727 of 2021 created the Pass-Through Entity Elective tax, effective for tax years beginning on or after January 1, 2022. Entities taxed as S Corporations may elect annually to pay Oregon income tax at the entity level at 9% on the first $250,000 of distributive proceeds and 9.9% on any amount above $250,000. The elective tax is reported on Form OR-21 and helps owners work around the federal $10,000 SALT deduction cap.[12]
S Corp income that passes through is taxed on each shareholder Oregon personal income tax return. Oregon uses a graduated individual income tax with a top marginal rate of 9.9%. Nonresident shareholders pay Oregon tax only on the share of income derived from Oregon sources.[9]
Oregon has no state sales tax. Oregon is one of only a handful of states with no general sales or use tax, so an S Corporation selling goods or services in Oregon does not collect state sales tax. Businesses with more than $1 million in Oregon commercial activity should still account for the Corporate Activity Tax.[10]
| Item | Cost |
|---|---|
| Articles of Incorporation (corporation) | $100[14] |
| Articles of Organization (LLC) | $100[14] |
| IRS Form 2553 filing | No fee[3] |
| Federal EIN (Form SS-4) | No fee |
| Oregon Annual Report (renewal) | $100 per year[5] |
| Oregon minimum excise tax (annual) | $150 flat[7] |
| Registered Agent service (typical commercial) | $100 to $300 per year |
| Optional: name reservation (120 days) | $100[14] |
| Feature | S Corporation | LLC |
|---|---|---|
| Formation Document | Articles of Incorporation ($100) | Articles of Organization ($100) |
| Federal Tax Treatment | Pass-through (Form 1120-S) | Pass-through by default (Form 1065 or Schedule C) |
| Oregon Tax Treatment | Form OR-20-S; flat $150 minimum tax | Form OR-65 or no return (disregarded); no minimum tax |
| Annual Filing | Annual report ($100) | Annual report ($100) |
| 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 |
| PTE-E Election | Yes (9% / 9.9%) | Yes if taxed as S Corp or partnership |
| Annual Reporting Deadline | Anniversary date | Anniversary date |
| 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 (foreign investors, IPO plans) to remain a C Corp or LLC. |
Keep in mind that Oregon $100 annual report fee, the $150 minimum tax, payroll setup costs, and ongoing CPA fees together add roughly $900 to $2,800 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 OR-20-S (Oregon) | Due April 15. Reports Oregon income and the flat $150 minimum tax.[1] |
| Oregon Annual Report | Filed online with the Oregon Secretary of State by the anniversary date. The fee is $100.[5] |
| Oregon Minimum Excise Tax | Flat $150 paid with Form OR-20-S each year the S Corporation does business in Oregon.[7] |
| Corporate Activity Tax (if applicable) | Required if taxable Oregon commercial activity exceeds $1 million. CAT return due April 15.[10] |
| Form 941 (Federal Payroll Tax) | Filed quarterly. Reports federal income tax, Social Security, and Medicare withheld. |
| Oregon Payroll Withholding | Periodic payroll withholding returns filed with the Oregon Department of Revenue.[9] |
| Oregon Unemployment Insurance Reports | Quarterly UI and combined payroll reports filed with the Oregon Employment Department.[11] |
| W-2s and 1099s | Distributed by January 31. Filed with the IRS, Social Security Administration, and Oregon Department of Revenue. |
| PTE-E Election (if applicable) | Made annually on Form OR-21, with quarterly estimated payments.[12] |
| Registered Agent Maintenance | Keep your registered agent and Oregon street address current under ORS 60.111.[4] |
Bibliography
[1] Oregon Department of Revenue. Corporation Excise and Income Tax. Accessed May 20, 2026.
[2] Oregon Secretary of State. Register Your Business. Accessed May 20, 2026.
[3] IRS. Instructions for Form 2553. Accessed May 20, 2026.
[4] Oregon Revised Statutes. ORS 60.111, Registered Office and Registered Agent. Accessed May 20, 2026.
[5] Oregon Secretary of State. Annual Report or Renewal. Accessed May 20, 2026.
[6] Oregon Department of Revenue. Form OR-20-S Instructions, Oregon S Corporation Tax Return. Accessed May 20, 2026.
[7] Oregon Revised Statutes. ORS 317.090, Minimum Tax. Accessed May 20, 2026.
[8] IRS. Where to File Your Taxes (for Form 2553). Accessed May 20, 2026.
[9] Oregon Department of Revenue. Personal Income Tax. Accessed May 20, 2026.
[10] Oregon Department of Revenue. Corporate Activity Tax (CAT). Accessed May 20, 2026.
[11] Oregon Employment Department. Information for Employers. Accessed May 20, 2026.
[12] Oregon Department of Revenue. Pass-Through Entity Elective Tax. Accessed May 20, 2026.
[13] IRS. S Corporations. Accessed May 20, 2026.
[14] Oregon Secretary of State. Business Registry Fee Schedule. Accessed May 20, 2026.
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