When a Single Member LLC elects S-corp status (f2553) and it is unintentionally terminated (and does not want S-corp status) what "tax entity" results? Does the LLC by default have C-corp status or 1040 Sch-C tax status after S-corp termination?
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Great question
>>what "tax entity" results?<<
Great question! I'm going to make my guess before any more careful person looks it up!
I think the S-corp election includes an implied election to be taxed as a corporation, even if they take the shortcut and leave out a step or two. Therefore, terminating S-corp defaults to C-corp. -
Not bad.
Page 19-4 of TTB. "An eligible non-corporate entity that files Form 2553 is deemed to have made an election to be taxed as a corporation."
I looked it up, but I doubt if that makes me more careful.Comment
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Thanks guys for the reply. I agree even though we really don't have any authority to quote. At first I thought it might default back to the default of the LLC but after thinking about it that would result in automatic disposition of assets at fair-market-value. Not a good thing. So... making the form 2553 S-corp election is also making a C-corp election.Comment
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