The default federal tax status for a single-member limited liability company (SMLLC) is disregarded entity. However, the owner of an SMLLC can elect to have the business taxed as either a traditional C corporation or as an S corporation. An S corporation is a special type of small, closely-held corporation.

Is election of S Corp status a taxable event?

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. Example 2: Now assume that the owners want X to operate as a regular C corporation.

How are S Corp elections taxed?

If you want your LLC to be taxed as an S corporation, you need to file IRS Form 2553, Election by a Small Business Corporation. If you file Form 2553, you do not need to file Form 8832, Entity Classification Election, as you would for a C corporation. You may use online tax filing, or can file by fax or mail.

Are S corps taxed at corporate rate?

The shareholders then report the same on their personal income tax returns (Form 1040), which are accordingly taxed at the applicable individual income tax rate. 4 Thus an S Corporation is exempt from paying taxes at the corporate level.

Should I elect S Corp status for my LLC?

Although being taxed like an S corporation is probably chosen the least often by small business owners, it is an option. For some LLCs and their owners, this can actually provide a tax savings, particularly if the LLC operates an active trade or business and the payroll taxes on the owner or owners is high.

Can an S Corp issue profits interests?

An S corporation cannot grant a profits interest without terminating its S election because a profits interest is a “second class of stock”.

What kind of tax status does a SMLLC have?

The default federal tax status for a single-member limited liability company (SMLLC) is disregarded entity. However, the owner of an SMLLC can elect to have the business taxed as either a traditional C corporation or as an S corporation.

Can a SMLLC be a C or S corporation?

Do you pay income tax on SMLLC dividends?

In light of the fact that, with a SMLLC taxed as an S corporation, you pay employment-related taxes on a salary but not on dividends, you might think that you should just take all your money from the SMLLC as a dividend, and thus avoid paying self-employment taxes altogether.

How are SMLLC payables affect basis calculation LLC?

Since you were a cash basis entity prior to the S corp (which is an assumption), the payables from the prior SMLLC will be addressed as they are paid. This will then have the proper effect on your basis at the time they are paid. *A reminder that posts in a forum such as this do not constitute tax advice.*