S Corp vs C Corp: Do Both Need Bylaws and Minutes?

S corp is a tax election, not a different entity

Every corporation is formed under state law by filing articles of incorporation. By default, it is taxed as a C corporation under federal tax law. An eligible corporation can elect to be taxed under Subchapter S by filing IRS Form 2553, generally with the consent of all shareholders. The election changes federal tax treatment; it does not change the corporation's state-law governance.

Some states recognize the federal S election automatically; others have their own rules or forms. Check with your tax advisor and our state notes.

S corp vs C corp comparison

S corporation eligibility basics

At a high level, a corporation generally must meet these requirements to elect S status:

• Be a domestic corporation
• Have no more than 100 shareholders
• Have only eligible shareholders — generally individuals, certain trusts and estates; not partnerships, corporations or nonresident alien shareholders
• Have only one class of stock (differences in voting rights alone are generally permitted)
• Not be an ineligible corporation, such as certain financial institutions and insurance companies

These rules have nuances, and an election can be lost if a requirement stops being met — for example, if shares are transferred to an ineligible holder. Coordinating transfer restrictions in the bylaws or a shareholder agreement is one way corporations try to protect the election. Ask a CPA or tax attorney.

Governance documents for either tax status

Bylaws and organizational minutes work the same whether or not you elect S status.

Why minutes matter for S corporations

Because the election depends on shareholder consents and ongoing eligibility, documenting it in your records is useful:

• Board resolution authorizing officers to file Form 2553 — often included in the organizational minutes.
• Shareholder consents to the election, kept with the filed form and the IRS acceptance letter.
• Officer compensation decisions, recorded in annual board minutes. Shareholder-employees of S corporations are commonly expected to receive reasonable compensation; your CPA can advise on amounts.
• Distributions, approved by the board and made in proportion to shareholdings, consistent with the one-class-of-stock rule.

Notes for C corporations

C corporations often have more complex capital structures — multiple share classes, outside investors, option plans — which makes careful board approvals and an accurate stock ledger especially important. Dividends are declared by board resolution.

Records to keep for an S election

Keep these in the tax section of your corporate records book. If a question about the election arises later, having the consents and the acceptance letter together is far easier than reconstructing them.