SMLLC S Corp election. Will Form 2553 suffice or will I also need Form 8832?

[DebitThatCreditThis]

I figured Form 2553 alone is ok for a multi member LLC but for a disregarded entity I am not so sure.

[Lion]

If already a SMLLC (even a disregarded entity SMLLC) or MMLLC, then only Form 2553. If your client is not yet any type of entity, then he needs to file both Forms 8832 and 2553.

[TaxGuyBill]

If already a SMLLC (even a disregarded entity SMLLC) or MMLLC, then only Form 2553. If your client is not yet any type of entity, then he needs to file both Forms 8832 and 2553.

You need an entity of some sort - either a corporation or a LLC. So you only need 2553. In what scenario would you also need a 8832?

[Lion]

If you are not an entity, such as a sole proprietor, you file 8832 "to be classified as an association taxable as a corporation," per Form 8832. Then file 2553 to make the S election. But the OP said SMLLC, so that client is an entity and needs just the 2553.

[Rapid Robert]

A sole proprietor (not an LLC) is not eligible to file Form 8832, since the sole proprietor is not an entity. Quick read of the form instructions and an internet search confirm this, for example a Forbes article that clearly states "If you are a sole proprietorship or corporation, then you are not eligible to file Form 8832." A partnership can file it, since it is an entity. You cannot magically make a sole proprietor into a separate entity simply by filing Form 8832.

Another source for this:

https://www.sba.gov/business-guide/launch-your-business/choose-business-structure

"Sole proprietorships do not produce a separate business entity."

[Lion]

Who does file both 8832 and 2553?

[Rapid Robert]

I don't think any entity needs to file both forms.

Post #4 is referring to some older, now obsolete rules (my recollection). It was originally logical to make it a two step process - first elect to be a corp, then elect to be an S-corp, but filing two similar forms for such an important election made no sense, so they changed it. Per some CCH reference material from many years ago, "An electing entity only has to file Form 2553, electing S corporation status and the entity will automatically be treated as having elected to be classified as an association taxable as a corporation; it need not file Form 8832, “Entity Classification Election,” in this case."

On the other hand, a partnership or LLC wishing to be taxed as a C-corp would only file Form 8832.

Of course, an entity that chooses C-corp status in one year, can still elect S-corp treatment in a subsequent year, so they would end up filing both forms, just not at the same time.