Discussion:Can a Single Member LLC Make an S-Corp election?
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Discussion Forum Index --> Advanced Tax Questions --> Can a Single Member LLC Make an S-Corp election?
Discussion Forum Index --> Tax Questions --> Can a Single Member LLC Make an S-Corp election?
1 February 2008 | |
| I thought I had researched to a satisfactory conclusion of "Yes", but I recently attended a seminar where the speaker said you could not do this--that you have to be a multi-member LLC to make the S-corp election. | |
| 1 February 2008 | |
| yes you can, if the single member is an eligible individual | |
| February 1, 2008 | |
| The stupid box is available to all willing to check it (as Kevin says, that are eligible, i.e. not foreign, etc.). | |
| 1 February 2008 | |
| An S-corporation is a from of a corporation. An LLC is a partnership. You have to be a corporation first, in order to make an s election. And otherwise qualify.
I think people think an LLC is a corp, it is Limited Liability Company, not Limited Liability Corp. Maybe what the guy in seminar meant was who is eligible to be a shareholder in a S-corp. Only individuals, estates, & some trusts. So an LLC can't be an s-corp shareholder.A single member LLC might be able to be because it is not recognized for tax purposes | |
| 1 February 2008 | |
| an SMLLC is not a partnership, and it can elect to be taxed as an S corp by filing Form 2553, Mike (assuming the SM is an eligible individual).
But I would agree that a MMLLC that doesn't elect to be taxed as a corporation would be taxed as a partnership - (but for legal purposes it is still NOT a partnership - only for tax purposes). I will be the first to admit that it took several years for me to understand that an LLC is a tax chameleon. | |
| February 1, 2008 | |
| Sorry, Mike, back to the books, man. You don't have to be a corp first. The LLC doesn't exist in IRS-land, so you get to pick how it's taxed. If you pick nothing, the defaults are that a SMLLC is a sole prop. and a MMLLC is a partnership. But the stupid box is available to all. Sadly. Perhaps one day IRS will recognize LLC's as separate entities and create...oh, right. Never mind. | |
| 1 February 2008 | |
| JR... what do you mean the "stupid box".... I use LLCs and have them taxed as S-Corps all the time... once the net income reaches @ $40K, you can save a lot of ss taxes...seen you post that you subscribe to the same...what am I missing here? | |
| 1 February 2008 | |
| Your cocky attitude doesn't do anyone any good here. This is an open discussion, sometimes there will be disagreements. Yes, you can make an election as a LLC to be taxed as a corporation. I am not seeing where that would mean that you are an S-Corp. | |
| 1 February 2008 | |
| Mike, IRS came up with a rev proc so that you could stream line electing S Corp status. If the election to become an S is made timely you don't have to file the 88%% (can't remember the form #) first, you just file the 2553 and you will be treated as an S Corp. Done | |
| 1 February 2008 | |
| Everyone I think is technically correct. To elect s status you must be either a corporation or an entity elibile to be taxed as a corporation, which could be done by filing form 8832 before making the s-election. Reg. 301.something or other (sorry I couldn't remember the cite), however, now allows the entity to file only the 2553 and the 8832 is deemed filed. So the SMLLC could simply file the 2553 to elect s-status, as Kevin said. | |
| 1 February 2008 | |
| Perhaps the cite I was searching for is the Rev. Proc. cited by MDT, although I do believe the process has been finalized in a reg. | |
| 1 February 2008 | |
| Right, I see what you mean. An LLC can make an election to be taxed as either a corp or an S-corp. I can see what MDtaxgal is saying, you can save the payroll taxes. I never found a reason for a LLC to be taxed as a corp, but s-corp makes some sense | |
| 1 February 2008 | |
| MD, we have referred to 'check the box' as 'check the stupid box' then finally just called it the 'stupid box' to refer to the ability to have an LLC taxed as an S corp. The reason we jokingly call it 'stupid' is because if the taxpayer wanted an S corp, they should have formed an S corp in the first place.
The 'check the box'/'stupid box' is our way of fixing what they got from the attorney because the attorneys seem to love LLCs but once we explain SE Tax, our clients love S corps. 8832 | |
| 1 February 2008 | |
| I don't know about that... Corporations (at least in MD) have to (or are supposed to ;)) hold corp meetings and have a board of directors, LLC's are not required to do any of that so less of a risk of having IRS say that one of your clients isnt' a Corp because he's not acting like a corp...cuz he isnt' a corp, he's an LLC... no corp meeting, no minutes, no bylaws, just the articles of org...in MD you just answer five questions. Sometimes you get a client who actually has an operating agreement but one is not required... doesn't seem so stupid to me. I prefer to go the LLC route then file the 2553. | |
| 1 February 2008 | |
| Discussion:"Check the Box" LLC argument revisted
to paraphrase a comment by JR1 last year "am I the librarian of TA?" | |
| 1 February 2008 | |
| bad paraphrase, here is the exact quote by JR1:
"Which reminds me, 80% of the questions here could be answered with a two or three word search in one of these databases. And I rarely am interested in being the librarian unless it's something I'm really curious about. Or has the internet become our library?" | |
| 1 February 2008 | |
| (of course, maybe it takes a librarian to remember where to look) | |
TheTinCook (talk|edits) said: | 1 February 2008 |
| I think you need a tip jar like the Starbucks guys have. | |
| February 1, 2008 | |
| Sorry, Mike, tongue was in cheek...but you can't see my face. All you file is the 2553, which covers the whole S electing by an LLC. Why is it the stupid box? Search around for some of the quandaries yet to be discovered when corp and llc law conflict. You'll have a legal LLC, taxed as a corp, and there will be conflicts which we don't know the resolution to. Perhaps Kevin linked to one of those threads. | |
| 1 February 2008 | |
| No problem JR1, yes, it seems like it can really complicate things... | |
| February 1, 2008 | |
| It's not anything unique to LLC's. Partnerships can be corporations for tax purposes, and (foreign) corporations can be partnerships for tax purposes. | |
| 1 February 2008 | |
| Thanks Kevin for the link... JR I see your point (made in other link) and I see where there could be some complex issues but most of my client are SMLLC's... If their biz looks involved (like trusts that want to be shareholders) I dont' advise them, I send them to a tax attorney. I like the LLC's because it seems every client pays his groceries out of the corp check book once in a while, with an LLC it seems the taxpayers due dilligence is a little more relaxed.I don't have to make the argument that he didn't operate like a corp...since he's not. | |
| 1 February 2008 | |
| Ok, I have to ask. If you have an LLC that elects to be treated as a corp and elects S status, would disproportionate distributions from the LLC be classified as a second class of stock and terminate the S election? | |
| February 1, 2008 | |
| Assuming they're on account of the "stock" -- i.e., the membership interests -- yes. | |
RoyDaleOne (talk|edits) said: | 1 February 2008 |
| I recently tried the 2553 on a SMLLC and the Service bounced the request.
Something about being a SMLLC so when the route of 8832 first and then 2553. Forgot why the Service required this. | |
| 1 February 2008 | |
| [This will reassure you that JR's comments were not meant to offend anyone]. | |
| 1 February 2008 | |
| 1 February 2008 | |
| Jdd, is this the thread you meant to post to? I can't figure out who P is/was/ain't never gonna be. | |
| 1 February 2008 | |
| MDTaxGal,
I think every state requires corp meetings of corporations, not just our lovely state of O'Mallelyland, aka the Democratic Peoples Republic of Maryland. Tom | |
| 1 February 2008 | |
| I imagine most states do but MerryLand is the only one I could speak to with confidence.. :) | |
| 1 February 2008 | |
| Oops. Wrong post. I'll delete that one and go where I'm supposed to. I find myself not where I'm supposed to be alot these days.
Sorry. | |
| 1 February 2008 | |
| Ok, maybe I won't delete it. At least I can't figure out how. I guess it will stay here forever as a testament to my inattentiveness (sp? where's that spell check?) | |
| 1 February 2008 | |
| MDTaxGal -- I'm not an attorney, but I would advise a client to be very careful to treat his SMLLC as an entity separate and distinct from himself, not for tax purposes, but to maintain the liability protection that was the whole point of creating the LLC in the first place. That means a separate bank account, no personal expenses paid from it, etc. I don't think there is a lot of legal precedent on this yet, but it seems logical that the "alter ego" argument for piercing the corporate/entity veil would work just as well against an LLC as against a corporation. | |
| 2 February 2008 | |
| Katie, of course, I agree. I've got a typical conversation I have with every client where we discuss the importance of oeprating in a biz like manner, blah blah blah ... but what we advise and what they do are often miles apart...:) | |
Actionbsns (talk|edits) said: | 2 February 2008 |
| Just a note to relatively new TA members - sometimes when JR talks about the "stupid box", Kevin talks about killing kittens and then there's raging talk about elephants - it's just an inside joke. The search button might help understand and waylay hurt feelings. JR doesn't really think everyone's stupid, Kevin doesn't really kill kittens (but he does like Girl Scout Cookies), and that raging elephant is just wandering around looking to get into trouble. Oh, and sometimes it's REALLY REALLY cold in Hawaii.
We promote laughter as a stress reducer at tax time. | |
| 2 February 2008 | |
| For the uninitiated:
Discussion: Allocation of Profit & Loss by an LLC that elected "S" status And do a search on "Elephants." You'll get the picture. Tom | |
Death&Taxes (talk|edits) said: | 2 February 2008 |
| I am teaching a course in linking, Tom!!!!!! You must start [[Discussion: .... and then paste. I do not take payment in Girl Scout cookies. | |
Death&Taxes (talk|edits) said: | 2 February 2008 |
| The links were in red because you did not put [[Discussion: in front of the link. | |
| 2 February 2008 | |
| Oops. Sorry about that. I forgot. I had two screaming 7 year olds running around my office (my daughter and her friend). I plead temporary insanity.
Thanks, Tom | |
| February 3, 2008 | |
| See, some are stupid.
Or perhaps just inattentive...! Kidding, kidding. Waiting on daughter to call so I can go pick her up from work... | |
Msmith7305 (talk|edits) said: | 3 February 2008 |
| Kevinh5-
You are only the librarian if you choose to be the librarian! :) | |
| 3 February 2008 | |
| Thanks MSmith! Sometimes having a memory works against yourself. It really isn't difficult to perform a search if you can remember one or two unique words from the post or know that you made a comment in the thread - for example, I can search 'fast elephant' and come up with exactly what I want, or 'Kevinh5 Candy' and come up with another. | |
8 October 2010 | |
| Can I confirm that in order to treat a SMLLC as an S corporation that the Form 8832 must be filed first? Then the Form 2553? Also, because s corps are "per share per day" none of the income retroactively can be reported in the s corporation? I'd like to confirm that this is done the correct and in the proper way.
Thanks in advance, Sincerely, TW | |
| 8 October 2010 | |
| The SMLLC need only file Form 2553 to make the S corp. election since by doing so, the SMLLC is deemed to have made the election to be treated as an association taxable as a corporation AND the election to be treated as an S corp. See Reg. 301.7701-3(c)(1)(v)(C).
As to your second question, enter "late S corp election" in the yellow search box and read the discussions. | |
| 8 October 2010 | |
| The SMLLC has been in extistance for 5 plus years (income has been reported on Sch C). . . does this matter? If I simply file the 2553 I can elect an effective date within the last 75 days?
Thanks again, TW | |
Stalker001 (talk|edits) said: | 8 October 2010 |
| I recently filed a 2553 for a single member LLC. It worked fine. | |
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