LLC to S Corp

[Safire]

New Client

Single Member LLC, which was formed mid year 2005 and filed on a Schedule C last year, has this year paid wages to the Single Member. ( All year long )

My advice to him was to File 2553 asap, and file as an S Corp for this and future years as the potential for huge profits are in this company with already gross sales for this year at over 3 million.

Is is correct that I no longer have to file the 8832? And what is the Rev Proc that I need to type across the top of form 2553, because it is passed the deadline for filing?

Any help is truly appreciated.

[Bill Tubbs]

Is is correct that I no longer have to file the 8832?

Check out the instructions for Form 2553, the very first paragraph.

And what is the Rev Proc that I need to type across the top of form 2553, because it is passed the deadline for filing?

My recollection is "Filed Pursuant to Rev Proc 2003-43", but I would suggest double-checking that...


Bill

[Safire]

Thanks Bill, I did actually look at the instructions, but overlooked that entirely.

Just looked in The Tax Book too, and Rev Prov 2003-43 looks right.

Relief is up to 18 months, but it's not automatic.

[OldJack]

My advice to him was to File 2553 asap, and file as an S Corp for this and future years as the potential for huge profits are in this company with already gross sales for this year at over 3 million.

You should give serious consideration to advising the client to incorporate as a C-corp.

[Safire]

Jack, I agree. But there was some problem with the suppliers. He has a floor plan of inventory, and the suppliers were not going to allow him to purchase the business unless there were personal guaranties on the inventory. They didn't even like the idea of the LLC.

He purchased an ongoing business that had a floor plan of inventory valued at over 300k.

I think the deal was worked out somehow with an additional guaranty by the previous owners for a period of time.

They really screwed up the entire thing in my opinion.

The S Corp that was already in place should have continued on with K-1s issued to show the proper amounts. But instead they liquidated it and set him up to finl on a schedule C.

Be back after lunch.

[jimmcg]

Late Elections

Simply note "Filed under Rev Proc 2003-43" on the 2553 and attach a statement establishing reasonable cause.

[Safire not logged in]

thanks jim

[dsi]

Would a disregarded entity pay wages to the only member?

[sea-tax]

Would a disregarded entity pay wages to the only member?

If by disregarded you mean an llc -sch c or 1065 no . Wages are not permitted in these situations.