An LLC may to elect to be an S corporation only if it meets all the following tests. It is (a) a domestic corporation, or (b) a domestic entity such as an LLC eligible to elect to be treated as a corporation, that timely files Form 2553. If Form 2553 is not timely filed, see Relief for Late Elections, later.

How to elect s status by an LLC?

However, the owners want X to be classified as an S corporation. The S election is made by filing Form 2553 rather than Form 8832. By properly filing a valid Form 2553, the entity elects S status and is deemed to have elected to be classified as an association taxable as a corporation.

Can a LLC be converted into a corporation?

If your LLC meets the S corporation requirements, then in many states you can use a process known as a “statutory conversion” to make the LLC/S corp. change. In a statutory conversion, the LLC’s assets and liabilities automatically transfer into a corporation. There’s no need to form a new corporation and dissolve the LLC.

What happens when a LLC elects a limited liability company?

If the LLC makes the election it is deemed to (1) transfer all of its assets and liabilities to the corporation in exchange for the corporation’s stock and then (2) distribute the stock to its owners in complete liquidation (Regs. Sec. 301.7701-3 (g) (1)).

If you’re interested in electing S corporation tax treatment for your LLC, there are a few other things to keep in mind. There are certain restrictions for who can form an S Corporation. For example, shareholders need to be legal residents of the U.S. and they need to be individuals (i.e. not partnerships or corporations).

What happens to a LLC if it elects s status?

If the election is made, the entity is deemed to transfer all of its assets and liabilities to the corporation in exchange for the corporation’s stock. The entity is then deemed to distribute the corporation’s stock to its owners in complete liquidation (Regs. Sec. 301. 7701 – 3 (g) (1)).

Can a LLC be taxed as a C corporation?

If done correctly, S corporation status will be granted right away, and you won’t be taxed as a C corporation for part of the year. This also preserves your owners’ limited liability and retains the convenience of pass-through taxation.

What do you need to make a LLC a corporation?

Prior to electing for an S corporation status, it is necessary to obtain an EIN (Federal Tax ID Number). If desired, it is possible for an LLC to become a corporation under the IRS’s check-the-box rules. If it elects to do so, it must transfer all assets and any liabilities to the new corporation.