LLC filing as s corp form [Expert Answers]

Last updated : Sept 27, 2022

Can LLC file as S corp?

For federal income tax purposes, there is no such thing as being taxed as an LLC. Instead, an LLC can be taxed like a sole proprietorship, a partnership, a C corporation or—if it qualifies—an S corporation.

How do I convert my LLC to an S corp?

To make an LLC to S corp. election with the IRS, you need to file form 2553 Election by a Small Business Corporation. The form must be signed by shareholders and an officer of the company.

Can an LLC file form 2553?

In the same way that a corporation can elect to be taxed as a corporation, an LLC may elect to be taxed as an S corporation by filing IRS Form 2553 with the IRS. The election must be made no more than two months and 15 days after the beginning of the tax year when the election is to go into effect.

Do an LLC need to file form 8832 and 2553?

If you're an LLC or partnership, use Form 8832 if you want to be taxed as a C-corp, partnership, or a sole proprietor. Meanwhile, Form 2553 is for LLCs or corporations that want to be taxed as S-corps. Keep this in mind: If you're filing Form 2553, you don't need to file Form 8832.

Why would an LLC file taxes as an S corp?

The S corporation is the only business tax status that lets you save on Social Security and Medicare taxes while avoiding double taxation. An LLC taxed as S corp offers benefits of a corporation while also providing flexibility on income treatment.

When should I file LLC as S corp?

To be treated as an S corporation by the IRS, an LLC must complete and file Form 2553. An LLC is eligible to receive S corporation status from the IRS only if: It has fewer than 100 shareholders. No shareholders are considered nonresident aliens.

Do I need a new EIN If I convert to an S corp?

You will be required to obtain a new EIN if any of the following statements are true. A new LLC with more than one owner (Multi-member LLC) is formed under state law. A new LLC with one owner (Single Member LLC) is formed under state law and chooses to be taxed as a corporation or an S corporation.

Can you electronically file form 2553?

You need to file Form 2553, Election by a Small Business Corporation to be treated as an S corporation by the IRS. You may file the form online, but only from the ElectSCorp website. If you would prefer to file it offline, these instructions may be helpful.

What is a form 2553?

A corporation or other entity eligible to be treated as a corporation files this form to make an election under section 1362(a) to be an S corporation.

When should an LLC file form 2553?

Example: Let's assume your LLC's next tax year starts on January 1st, 2022. Your LLC must file Form 2553 on or before March 15th, 2022. If you file within that period, then the S-Corp status takes effect for the entire 2022 tax year.

Why should an LLC file form 8832?

Pursuant to the entity classification rules, a domestic entity that has more than one member will default to a partnership. Thus, an LLC with multiple owners can either accept its default classification as a partnership, or file Form 8832 to elect to be classified as an association taxable as a corporation.

Can single-member LLC own S-corp?

The default federal tax status for a single-member limited liability company (SMLLC) is disregarded entity. However, the owner of an SMLLC can elect to have the business taxed as either a traditional C corporation or as an S corporation. An S corporation is a special type of small, closely-held corporation.

Who should file form 8832?

Tax form 8832 is typically used by partnerships or Limited Liability Companies (LLCs) to choose or change their tax classification. In technical terms, Form 8832 lets taxpayers elect to classify or reclassify their entity structure from one type to another.

Who fills out form 8832?

An eligible entity uses Form 8832 to elect how it will be classified for federal tax purposes, as: A corporation. A partnership. An entity disregarded as separate from its owner.

Do you have to file form 8832 every year?

Form 8832 must be filed between one year prior and 75 days after its effective date. Most LLCs want their Form 8832 to be effective for their first tax year, so the form must be filed no sooner than one year and no later than 75 days after beginning business.

Which is better for taxes LLC or S Corp?

LLCs. As an LLC owner, you'll incur steep self employment taxes on all net earnings from your business, whereas an S corporation classification would allow you to only pay those taxes on the salary you take from your company. However, itemized deductions could make an LLC a more lucrative choice for tax purposes.

How do I know if my LLC is an S Corp or C Corp?

You'll find your corporation classification on your business returns. You can review previously filed tax returns or ask your accountant to review the returns. All corporations must file an annual income tax return. C corporations file IRS Form 1120 and S corporations file Form 1120S.

Does an LLC taxed as an S Corp get a 1099?

LLCs and Form 1099-NEC Accordingly, an LLC will only get Form 1099-NEC if it's taxed as either a single-member LLC or a partnership. If it's taxed as an S corporation, it won't receive a 1099.

How do I change from sole proprietor to S corp?

A sole proprietorship can't be changed to an S corp directly. Instead, the owner must first form either an LLC or a C corp and then elect S corp status with the Internal Revenue Service (IRS).

How do I pay $800 minimum franchise tax for an S corp?

1. Go to www.ftb.ca.gov/pay.
2. Choose “Bank Account”
3. Choose Web Pay Business or Web Pay Personal, depending on the entity type. Follow the prompts to provide the requested information and pay the tax.

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hey this is attorney elizabeth potts weinstein and today we're going to be talking about how to make your llc be taxed as an s corporation so if you have a llc or limited liability company for your business the default is that it is taxed just as if you were a sole proprietorship if there's only one owner or it's taxed as a partnership if there are multiple owners but you may want it to be taxed as an s corporation instead for the various tax benefits that exist for us corporations now before you make the election with the irs to turn your llc into something that is taxed like an s corporation you have to have your llc it has to already be formed and you have to already have gotten your ein from the irs i have videos about both those things and you can see the links for that below the deadline to elect to have your llc be taxed as an s corporation is two months and 15 days after the tax year starts where you want it to count now that calculation if you just formed your llc yesterday it's two months and 15 days from yesterday when you form the llc even though it's the middle of the year right now but if you want your llc to be taxed as an s corporation next year you can either file it now you can file it ahead of time and say you want it effective as of january 1st or you can file it in the first two months and 15 days of next year and have it be effective for that next year what if it's too late for you what if it's way past two months and 15 days when you want this to be effective there is a way to still get that s corp election for your llc for either this year or even prior years but it has very specific rules and things that you have to do so we're going to talk about that but it'll be more at the end of the video because i want to show you exactly in the form where you're going to do that so to have your llc be taxed as an s corp you have to file a form with the irs this is a not an online form sadly it is a pdf that you're going to fill out and print and sign and you're either going to fax it to them or you're going to mail it to them so let's go ahead and look at the various irs website pages which i will also have linked below that apply to this and also the pdf so the first thing you want to do before you make this election is make sure that you actually are allowed to do it there's a bunch of different qualifications most of which are probably true for you it has to be domestic so it can't be a corporation formed in another country it can only have allowable shareholders or owners of this business so it can be individuals it can be certain kinds of trusts like if you have a revocable living trust that owns your business and it has to be people who are either u.s citizens or residents like green card residents this is the thing that tends to trip up my clients is one of the owners is not a u.s citizen and doesn't live here they don't have a green card they're in another country you cannot be an s corporation either analysis texas s corporation or corporation tax a census corporation you also have to have no more than 100 shareholders most of my clients this isn't isn't an issue for them but sometimes people will have outside investors and things like that and this will come up the other big thing that comes up is you can only have one class of stock so sometimes when people get outside investors and they're passive investors or they want their money first or whatever they'll set up different classes of stock they'll have preferred stock they get paid up first because they're preferred et cetera you can't do this and be an s corp that's c corp land so assuming that you meet all the different qualifications then let's go look at the form that you're going to need to fill out it's form two five five three election by a small business corporation and this is the same form if you're a corporation that wants to elect to be an s corp or if you're an llc that wants to be elected as an escort i'm gonna link to the main page on the irs.gov website that has these forms but since links may change all you have to do is go to the irs's website and search for form 2553 and then you'll see that the links come up there just in case these links change in the future so there's a form which is a pdf that you're going to fill out and then there are instructions for it i recommend that you pull up the instructions and have them handy because you're going to need that information later let's go ahead and look at form 553 the first page tells you where you file so in half of the states you're filing it in kansas city missouri and the other half of the states you're filing it in utah but they also have fax numbers which are two different fax numbers depending upon where you're located it's probably a good idea to fax it in instead of mailing it because if you mail it who knows the post office is going to lose it and then also it'll take longer and i actually think they process that slower because someone has to literally open up the envelope and everything during the 2020 2021 situation the irs had literally like truckload tractor trailers full of mail that was unopened so faxing will avoid that kind of a problem i don't know how much faster it will be because they're very very very behind but probably faster than the mail so next let's actually look at form 553 some of the beginning parts are fairly simple you're going to put the name of the llc so pots weinstein financial consulting llc is my made up names for today you're gonna put the ein which you need to have already gotten so one two three four five six seven eight nine i can't remember how many numbers it is all right the number street and room or suite number the date incorporated which is the date you formed this thing so let's say we formed it um 5 1 20 22 just as a random date um san francisco california 133 day state of incorporation so let's say you formed it in california check the applicable boxes if the corporate entity after applying for ein changed its name or address so if i made this business as of may 1st and right now i'm recording this on may 6. i haven't changed the name of our address but if it's been a while you might have done that since you formed the ein so that's one of the things you would check there election is to be effective for tax year beginning month day year so if you want it to be effective on the day you formed your llc then you would put that date here zero five zero one twenty twenty two but let's say it's here in 2022 in may 2022 and you want it to be effective for the tax year 2023 so you'd put january 1st 2023. it's that straightforward just to figure out which year you want to count and if it's you started your business in the middle of the year it's the middle of the year otherwise it's usually going to be january 1st speaking of tax years section f is about what tax year are you going to be using so most businesses especially most small businesses have a tax year that's the calendar year january 1st through december 31st but occasionally it makes sense to not have that be your tax year so let's say you're a business that you're you sell on ebay and

Thanks for your comment Toshia Blakenship, have a nice day.
- Iola Berks, Staff Member

in this episode i'm going to talk about s corporation through this video you may discover that an s corporation election is right for you you could possibly save a lot of money if you decide to elect your business as an s corporation so you probably clicked on this video because you are in the process of starting your business hello everyone i'm andrew from malai law where we help entrepreneurs just like you start your businesses without having to deal with all the complicated legal forms our don for you service is backed by over 1 95 google reviews and we can help you start your business as well i am a law graduate who just recently took my bar examination i am currently waiting for my bar examination results and now i'm helping entrepreneurs just like you start your businesses if you are a business owner or a potential business owner if you've spoken with a cpa a tax person may have introduced you to the idea that your business should be taxed as an s corporation a lot of business people don't know how an s corporation affects their business it is my goal through this video to talk to you about an s corporation and to break it down in simpler terms so business owners like yourself can learn a little bit more about the nest corporation so when you're forming a business you begin by choosing a business entity now you have two options for this business entity first option is to form an llc the second option is to form an s corporation a corporation can elect to be an s corporation and whether you're a c corporation or an s corporation is strictly a federal tax issue it does not affect the type of entity you are in the eyes of the state or how the business operates on a daily basis it is strictly related to federal taxes some people say there are two corporations c and s corporations however that's not really the right way to say that a corporation can elect to be an s corporation and whether you're a c corporation or an s corporation is strictly a federal tax issue it does not affect the type of entity you are in the eyes of the state it does not affect how your business runs on a day-to-day basis again it is strictly related to federal taxes if you form a corporation the corporation defaults to a c corporation as c and s corporation those names come from the subchapter of federal tax code if you're a c corporation which is the default i will explain to you what happens with these taxes money comes in taxed as a corporation a separate entity that must pay its own taxes basically this means that when the business makes money the company must pay taxes on that money then once that money is distributed to shareholders the distribution is then taxed again subject to double taxation basically meaning that it is taxed twice as opposed to an llc which is a pass-through entity this means when money comes in it is only taxed once at the individual level of the business owners the llc is not its own separate taxable entity it is taxed in relationship to the business owners what happens when you elect to be treated as an s corporation the s corporation gets to avoid that double taxation a corporation can elect to be an s-corporation by filling out irs form 2553 the income and the losses to the corporation are taxed at the individual level of the shareholders the corporation is not paying that tax what does this mean it is going straight through to the shareholders shareholders are able to personally deduct the expense from their taxes as well that is amazing so the question you're probably asking yourself is why are not everyone why aren't more business owners electing their corporations to be taxed as an s corporation the thing with s-corporations is that the irs is very strict there are certain requirements that must be met in order for a business to meet and to be eligible for an s-corporation example the corporation must be a domestic corporation it cannot be a foreign corporation shareholders must all be individuals there's a little bit of a difference when it comes to corporations the partnerships and corporations can be shareholders of corporations however as corporations members cannot be partnerships or corporations there must be 100 or fewer shareholders only one class of stock few types of businesses that are not a legible for that so if your business is related to something along the lines of an insurance company or a financial institution those look more into it if you are illegible or not i recommend that you look a little bit more into it to determine whether or not you are eligible now if you meet requirements of an s corp it may be able to save your company a lot of money on taxes it is important to note however that llcs can also be elected to be taxed as an s-corporation llc pays taxes once instead of twice like a corporation this means that taxes passed through to the owners of the llc an owner of an llc you have to pay self-employment taxes employee of a business you get paid and some taxes are taken out but the thing is you need not pay self-employment taxes if you are an owner of the business you have to pay self-employment taxes which go to social security and medicare business owners get to take wages as employees from the company they get to pay income taxes from that money that they get paid as employees but they don't have to pay that self-employment tax if your llc is taxed as an s-corporation because they are being paid as employees and any additional income that comes in is taxed as dividends electing to be treated as an s-corporation is a way to avoid paying that self-employment tax so you may be telling yourself i'm a business owner i'm gonna go ahead and set up an s-corporation and i won't take any money out only my dividends will be subject to taxation the thing with that is irs says that all llc's taxed as an s corporation the owner employees must take reasonable wages custom pay this basically means that you must search and you must do research and you must look to see what other people in your same field are getting paid cannot just avoid paying anything and avoid paying taxes altogether do a little bit of research and determines how much someone in your position would make uh the similar practice that you participate in and so you must pay yourself that amount whatever that custom amount may be and the additional income is dividends electing to be taxed as an s corporation is a way to save a bit by not having to pay self-employment taxes this was a short and basic explanation to elect to be treated as an s corporation a lot of other things are also to be considered that i will not dive into today but if you are starting a business and you believe it is the right way to go or your business is building right now and it's growing i advise that you speak with the right cpa or a good tax attorney and if so if you determine that an s corporation is right for you that is very good you will save money on taxes it's important to note that i am not a tax expert i received a tax concentration in law school but i am not a tax expert if you have any questions about anything discussed make sure you click the link in the

Thanks Texacoe your participation is very much appreciated
- Iola Berks

About the author

Iola Berks

I've studied behavioural genetics at Fordham University in The Bronx and I am an expert in medieval philosophy. I usually feel shocked. My previous job was loan officer I held this position for 26 years, I love talking about baking and basketball. Huge fan of James Harden I practice cycling and collect basketball cards.