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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 Rhode Island, an S Corporation files Form RI-1120S, the Subchapter S Business Corporation Tax Return, by the 15th day of the 3rd month following the close of the tax year (March 15 for calendar-year filers). The entity itself pays only the $400 annual minimum franchise tax. Net business income then passes through to shareholders, who pay Rhode Island personal income tax at graduated rates of 3.75%, 4.75%, and 5.99%. [1] [14]
Rhode Island also offers an elective Pass-Through Entity (PTE) tax under R.I. Gen. Laws § 44-11-2.3, originally enacted by Public Law 2019, ch. 88, art. 5. The PTE election lets the entity pay state income tax on Rhode Island net income at the highest individual rate of 5.99% at the entity level, preserving the federal SALT deduction for shareholders. Beginning with tax year 2024, the PTE election is reported on a schedule that is part of Form RI-1120S. [15] [7] [16]
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 RI-1120S (Rhode Island) | March 15 (calendar-year filers) | 15th day of the 3rd month after the close of the tax year. Same deadline as the federal Form 1120-S. Pay the $400 minimum franchise tax with the return. [1] |
| File Form 1120-S (Federal) | March 15 (calendar-year filers) | Distribute Schedule K-1s to shareholders. [3] |
| Pay $400 Minimum Franchise Tax | March 15 with Form RI-1120S | Required of every Rhode Island corporation, including S Corps, under R.I. Gen. Laws § 44-11-2(e). [14] [1] |
| Elect Rhode Island PTE tax | By the original or extended due date of Form RI-1120S | Made by completing the PTE schedule on Form RI-1120S beginning with tax year 2024. The election is annual. [16] [7] |
| Pay quarterly estimated tax | April 15, June 15, September 15, December 15 (calendar year) | Required if the S Corp expects to owe more than $250 in Rhode Island tax (PTE or franchise) for the year. [9] |
| File Annual Report | Between February 1 and May 1 each year | Filed with the Rhode Island Department of State, Business Services Division. The fee is $50 for domestic corporations. [2] [5] |
| Set up payroll | Before paying yourself a salary | Register with the Rhode Island Department of Labor and Training (DLT) for unemployment insurance and with the Division of Taxation for withholding before issuing W-2 wages. [11] [12] |
An S Corp is a tax classification, not a standalone entity. You must have an active Rhode Island corporation or LLC on file with the Department 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, for the election to take effect. For a calendar-year corporation electing S Corp status for 2026, the deadline is March 16, 2026 (March 15 falls on a Sunday). [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 IRS filing fee.
If your principal business office is located in Rhode Island, mail Form 2553 to: Department of the Treasury, Internal Revenue Service, Kansas City, MO 64999. [8]
Fax number for Rhode Island businesses: 855-887-7734. [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.
Rhode Island follows the federal S Corp classification automatically. Once your federal Form 2553 is accepted, Rhode Island will treat your business as an S Corp for tax purposes when you file Form RI-1120S. There is no separate Rhode Island election form to submit. [1]
After your federal acceptance, retain a copy of your IRS CP261 acceptance letter with your tax records and file Form RI-1120S beginning the first applicable tax year.
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 owners’ 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 Rhode Island corporation must file an annual report with the Department of State, Business Services Division, between February 1 and May 1 each year. The fee is $50 for domestic corporations. Failure to file on time can lead to administrative dissolution by the Department of State. [2] [5]
File IRS Form 1120-S and distribute Schedule K-1s to all shareholders by March 15 (calendar-year filers). File Rhode Island Form RI-1120S by the same March 15 deadline, paying the $400 minimum franchise tax (or the PTE tax, if elected). [1]
Rhode Island grants an automatic extension if the federal Form 7004 is filed; however, the $400 minimum franchise tax payment is still due by the original March 15 deadline. Late payment triggers interest and penalties. [1] [9]
S Corps that elect the PTE tax must make quarterly estimated payments if the expected liability exceeds $250. Use Form RI-1120ES to remit estimated payments through the Rhode Island Division of Taxation portal. [9]
Rhode Island assesses a failure-to-file penalty of 5% per month (max 25%), a failure-to-pay penalty of 0.5% per month (max 25%), plus interest. The $400 minimum franchise tax accrues regardless of whether the return is filed on time. [1]
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/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 Rhode Island follows the federal S election automatically, there is no separate state late-election process. Once the IRS grants late election relief, Rhode Island 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 on 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 Rhode Island follows the federal classification, a federal revocation automatically terminates the Rhode Island S Corp status. The entity then files as a C Corp on Form RI-1120C for tax years beginning after the federal revocation, paying 7% of Rhode Island net income or the $400 minimum, whichever is greater. Once revoked, you generally cannot re-elect S Corp status for five years without IRS consent. [1] [14]
Every corporation organized or doing business in Rhode Island, including S Corps, must pay the $400 annual minimum tax under R.I. Gen. Laws § 44-11-2(e). This is reported and paid with Form RI-1120S each March 15. The minimum applies regardless of income, losses, or activity level, making it the floor that every Rhode Island S Corp pays. [14] [1]
| Entity Type | Rhode Island Entity-Level Tax |
|---|---|
| S Corporation | $400 minimum franchise tax (or PTE tax at 5.99% if elected) [14] [15] |
| Partnership / LLC (partnership) | $400 minimum tax (Form RI-1065) [2] |
| C Corporation | 7% of Rhode Island net income, with $400 minimum [6] [1] |
| Sole prop / disregarded SMLLC | $400 minimum tax for the LLC; owner pays individual rates (3.75% to 5.99%) [2] |
Rhode Island’s elective PTE tax, enacted by Public Law 2019, ch. 88, art. 5 and codified at R.I. Gen. Laws § 44-11-2.3, lets S Corps pay state income tax at the entity level at 5.99% (the highest individual rate). Beginning with tax year 2024, the election is made on a schedule that is part of Form RI-1120S. Income subject to the PTE is excluded from the shareholders’ Rhode Island personal income tax base, preserving the federal SALT deduction. [15] [16] [7]
Estimated PTE payments are required if the expected liability exceeds $250 for the year. The PTE election is made on a year-by-year basis. [7]
Rhode Island imposes a graduated individual income tax with three brackets: 3.75% on the first portion of taxable income, 4.75% on the middle bracket, and 5.99% on income above roughly $181,650 for 2025 (brackets are inflation-adjusted annually). Nonresident shareholders pay tax only on the share derived from Rhode Island sources, with pass-through withholding required at the highest individual rate of 5.99% under R.I. Gen. Laws § 44-11-2.2. [1] [7]
Rhode Island’s state sales tax is 7%, one of the simplest sales tax structures in the country because there are no local sales tax add-ons. Register through the Division of Taxation tax portal. [10]
| Item | Cost |
|---|---|
| Articles of Incorporation (domestic corporation) | $230 filing fee [2] |
| Articles of Organization, LLC | $150 filing fee [2] |
| IRS Form 2553 filing | No fee [3] |
| Federal EIN (Form SS-4) | No fee |
| Annual Report (corporation) | $50 per year [2] |
| Annual Report (LLC) | $50 per year [2] |
| Minimum corporate franchise tax | $400 per year (every corporation) [14] [1] |
| Registered Agent service (typical commercial) | $100 to $300 per year |
| Feature | S Corporation | LLC |
|---|---|---|
| Formation Document | Articles of Incorporation ($230) | Articles of Organization ($150) |
| Federal Tax Treatment | Pass-through (Form 1120-S) | Pass-through by default (Form 1065 or Schedule C) |
| Rhode Island Tax Treatment | Form RI-1120S; $400 minimum tax | Form RI-1065 or schedule on owner return; $400 minimum if active |
| Annual Report | $50, Feb 1 to May 1 | $50, Feb 1 to May 1 |
| 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 Election Available | Yes (5.99%) | Yes if taxed as S Corp or partnership |
| Annual Reporting Window | February 1 to May 1 | February 1 to May 1 |
| 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, the $400 minimum franchise tax, and other 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 and the $400 minimum tax. |
| $60,000 to $100,000 | S Corp election usually saves $2,000 to $5,000 per year in self-employment taxes, even after the $400 minimum tax. |
| $100,000 to $200,000 | Strong candidate. Savings often $5,000 to $10,000+ 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 Rhode Island’s $400 minimum franchise tax, $50 annual report fee, payroll setup costs, and ongoing CPA fees together add roughly $1,200 to $3,000 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 RI-1120S (Rhode Island) | Due March 15. Reports Rhode Island income, applies the $400 minimum franchise tax, and computes any PTE tax elected. [1] |
| $400 Minimum Franchise Tax | Paid with Form RI-1120S each March 15. Required of every Rhode Island corporation under § 44-11-2(e). [14] |
| Annual Report | Filed with the Rhode Island Department of State between February 1 and May 1. $50 fee. [2] [5] |
| Form 941 (Federal Payroll Tax) | Filed quarterly. Reports federal income tax, Social Security, and Medicare withheld. |
| Form RI-941 | Rhode Island withholding tax return filed with the Division of Taxation. [12] |
| DLT Quarterly Tax and Wage Report | Quarterly unemployment insurance contribution and wage report filed with the Rhode Island Department of Labor and Training. [11] |
| W-2s and 1099s | Distributed by January 31. Filed with the IRS, the Social Security Administration, and the Rhode Island Division of Taxation. |
| Estimated Tax Payments | Quarterly federal estimated tax; Rhode Island estimated tax if PTE election or other liability exceeds $250. |
| PTE Election (if applicable) | Made annually on the PTE schedule of Form RI-1120S beginning with tax year 2024. [16] |
| Registered Agent Maintenance | Keep the agent and Rhode Island registered office current with the Department of State (§ 7-1.2-501). [4] |
[1] Rhode Island Division of Taxation. Tax Filing Requirements (Corporate Tax). Accessed May 19, 2026.
[2] Rhode Island Department of State. Your Structure (Business Basics). Accessed May 19, 2026.
[3] IRS. Instructions for Form 2553. Accessed May 19, 2026.
[4] Rhode Island General Assembly. R.I. Gen. Laws § 7-1.2-501 (Registered Office and Registered Agent). Accessed May 19, 2026.
[5] Rhode Island Department of State. Business Services Division (Annual Reports and Filings). Accessed May 19, 2026.
[6] Rhode Island Division of Taxation. Corporate Tax (Overview). Accessed May 19, 2026.
[7] Rhode Island Division of Taxation. Pass-Through Entities (Composite Return and PTE). Accessed May 19, 2026.
[8] IRS. Where to File Your Taxes (for Form 2553). Accessed May 19, 2026.
[9] Rhode Island Division of Taxation. Corporate Tax Forms. Accessed May 19, 2026.
[10] Rhode Island Division of Taxation. Sales and Use Tax. Accessed May 19, 2026.
[11] Rhode Island Department of Labor and Training. Employer Tax Section. Accessed May 19, 2026.
[12] Rhode Island Division of Taxation. Withholding Tax. Accessed May 19, 2026.
[13] IRS. S Corporations. Accessed May 19, 2026.
[14] Rhode Island General Assembly. R.I. Gen. Laws § 44-11-2 (Imposition of Tax; $400 Minimum). Accessed May 19, 2026.
[15] Rhode Island General Assembly. R.I. Gen. Laws § 44-11-2.3 (Pass-Through Entity Election). Accessed May 19, 2026.
[16] Rhode Island Division of Taxation. Pass-Through Entity Election Forms. Accessed May 19, 2026.
