Categories: Business Entities

Can an LLC File a 2553 S Corp Election?

We’ve all heard about the benefits of filing an S Corp election for your C Corporation. You get to avoid paying federal corporate income tax, when with a C Corporation you are subject to double taxation. Filing for an S Corporation status has always been an easy solution to getting out of double taxation.

Even as a Corporation, your business has to qualify for an S Corp election:

In order to qualify for S Corporation status, your Corporation must have less than 100 shareholders and issue only one class of stock. If your Corporation qualifies, any income earned by the corporation gets to pass through the business, untaxed, directly to the shareholders. The business owner, though, still has to pay personal income taxes. Though remember that the pass-through structure is only guaranteed at a federal level. You should check with your state’s secretary or department of corporations to see whether or not the state respects the pass-through structure. Though most states do, some states still require some tax to be paid on corporate income.

But what about LLCs? Can they file an S Corp Election?

Absolutely! The benefits of having taxes passed along to the shareholders and the once a year filing requirement apply to LLCs as well. For an LLC to elect an S Corporation status, it must file the IRS S Corp Form 2553. Although, keep in mind that the election must be filed within 75 days of your LLC’s formation, or within 75 days of a new year.

Though, an LLC already has the benefit of pass-through taxation, so why would an LLC want an S Corp Election?

It’s common for a small business owner to want to file as an LLC for state law reasons, but desire an S Corporation election for other specific tax purposes. For example, a business owner could want S Corp status because a partner in a partnership is subject to self-employment tax on their distributive share of the partnership’s trade or business income, when with an S corporation, the owner is not subject to self-employment tax on their pass-through income or distributions from the S corporation.

Get all the benefits of an LLC (easy start up, simple management structure, and inexpensive to start) along with the benefits of an S Corporation today!

Have any questions or want to get started on your own S Corp Election? Visit us at www.mycorporation.com or give us a call at 1 (877) 692-6772!

Deborah Sweeney

Deborah Sweeney is an advocate for protecting personal and business assets for business owners and entrepreneurs. With extensive experience in the field of corporate and intellectual property law, Deborah provides insightful commentary on the benefits of incorporation and trademark registration.

Education: Deborah received her Juris Doctor and Master of Business Administration degrees from Pepperdine University, and has served as an adjunct professor at the University of West Los Angeles and San Fernando School of Law in corporate and intellectual property law.

Experience: After becoming a partner at LA-based law firm, Michel & Robinson, she became an in-house attorney for MyCorporation, formerly a division in Intuit. She took the company private in 2009 and after 10 years of entrepreneurship sold the company to Deluxe Corporation. Deborah is also well-recognized for her written work online as a contributing writer with some of the top business and entrepreneurial blogging sites including Forbes, Business Insider, SCORE, and Fox Business, among others.

Fun facts/Other pursuits: Originally from Southern California, Deborah enjoys spending time with her husband and two sons, Benjamin and Christopher, and practicing Pilates. Deborah believes in the importance of family and credits the entrepreneurial business model for giving her the flexibility to enjoy both a career and motherhood. Deborah, and MyCorporation, have previously been honored by the San Fernando Valley Business Journal’s List of the Valley’s Largest Women-Owned Businesses in 2012. MyCorporation received the Stevie Award for Best Women-Owned Business in 2011.