LLC change to S Corp?

[thomtax]

I have a company that started this last year. They chose the LLC route to be taxed as a partnership. It is a 50-50 with a husband and wife.

Now, the company is growing large faster than anticipated. He is talking about wanting to change to an S corp. to avoid some of the high SE tax. I know that on the original forms there was the option to chose between being taxed as sole proprietor, partnership or corporation. Under the corporation choice, can this be an S corp? Also, can this be changed with a certain form or is it necessary to start up a new company and transfer assets into the new company?

It will probably be a real pain, whichever he choses.

Thanks in advance for any guidance.

LT

[JoshinNC]

No need to form new entity

The LLC will simply file an election pursuant to the year in which it desires to be taxed as a corp, and it will be taxed as corp.

Now, why is there a problem with high SE tax? Are the members taking GP from the business? This can be avoided in many cases and will lead to lower SE. Additionally, if they elect S status and distribute appreciated property out of the LLC to a member they may have a big tax bill. Review all of the options before assuming S status will end all their problems.

[janedj]

llc / s corp

a llc can elect to be taxed as an s corp. the irs forms required are (1) Form 8832, Entity Classification Election and (2) Form 2553, Election by a Small Business Corporation.

[JoshinNC]

you can skip step 1

the 8832 is no longer needed if you file the 2553