Electing a new S Corp for a SMLLC

[John of PA]

Does this sound correct: To elect S Status you simply file a 2553 by March 15th of the year following the effective year for S Status. And most states automatically recognize the filing.

[Burke]

I believe the 2553 is for an existing corporation electing S status, or a new corporation. To change from an SMLLC or LLC (treated as a partnership) to a corporation, you may need Form 8322. I cannot vouch for all states.

[John of PA]

My understanding is there is no need to change to a Corp. A SMLLC can elect S Status and file an 1120S rather than a Sch C.

[Burke]

1. Is this the first year of the SMLLC? (i.e., has not yet filed a tax return - Sche C?)
2. Did it make a prior election to be treated as a disregarded entity, or any other entity?

Sorry my reply was not wholly clear. Any IRS election is for tax purposes only, and does not change the business entity from an LLC under state law. For all other purposes, it remains an LLC.

See https://www.irs.gov/Businesses/Small...lity-Companies. This bulletin states Form 8832 required. Instructions for Form 2553 seem to indicate under the right circumstances, it may not be. I would do both, and attach to the first tax return filed using S-Corp status. And since the tax return due date will move up to 3/15/xx from 4/15/xx, make sure it is filed timely.

[Ken]

s corp

Does this sound correct: To elect S Status you simply file a 2553 by March 15th of the year following the effective year for S Status. And most states automatically recognize the filing.

In Arizona anyway,..you have to fill out all kinds of paperwork ,for the state alone. The 2553 form is all you need for the Federal. I know because I just went through that.

[S T]

See IRS.gov at http://www.irs.gov/Businesses/Small-...lity-Companies and http://www.irs.gov/publications/p3402/ar02.html

Hope this helps

Sandy

[DaveinTexas]

Nice Article

See IRS.gov at http://www.irs.gov/Businesses/Small-...lity-Companies and http://www.irs.gov/publications/p3402/ar02.html

Hope this helps

Sandy

Well put. The requirement to file the 8832 along with the 2553 went away back in 2007 (I think). Just file the 2553 only to make the S Election. As for the State, I wouldn't know but the LLC status should remain. I live in a non taxing State so I can't speak to that process.

I also read somewhere (this is a bit controversial) that since an LLC was never and is never "technicaly" a Corporation, then the 2553 is never considered late even if it is filed after March 15th. But, if your client wants to elect S Status for 2013, the due date has passed unless they qualify for a late election (See Late S Corp Elections). To make filing simpler though (no 2 short year business returns) it may be wise to consider waiting until Jan 1 to file the election. That way the client will be considered an S Corp for all of 2014.

[John of PA]

The LLC has been filing a Sch C each year and has never made a prior year election to file as an entity.

[John of PA]

Thank you everyone for your input on this, which now leads to another quesition. Is it too late to file for S Status for 2013? This is a Sch C proprietorship SMLLC filing to be taxes as an S Corp. Too late for 2013. There is some confulsion about late S elections now being allowed by IRS.

[DaveinTexas]

All seems to be ok with the new Late Election Rev Proc

Thank you everyone for your input on this, which now leads to another quesition. Is it too late to file for S Status for 2013? This is a Sch C proprietorship SMLLC filing to be taxes as an S Corp. Too late for 2013. There is some confulsion about late S elections now being allowed by IRS.

I know there are many articles on the new Rev Proc, but this one was the simplest to understand for me: http://www.forbes.com/sites/anthonyn...nue-procedure/

Apparently, there is almost no entity that doesn't qualify for late election relief, even after the prescribed 3 year 75 day late period.

It seems your client will still qualify for an effective date of Jan 1, 2013. Just remember to stress the fact that the company will be treated as an S Corp for the entire year, so the owner's salary may need to be caught up (just a thought).