Discussion:S Corp vs LLC
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Discussion Forum Index --> Tax Questions --> S Corp vs LLC
| 9 March 2006 | |
| Can a husband & Wife LLC Partnership be converted to an S Corp? I know a husband and wife will be treated as shareholder. So can they elect to file as an S Corp for 2006? | |
| 9 March 2006 | |
| Sure. But I prefer actually incorporating...but Sec. 751 is the tax free reorg from a 1065 to a corp...done all the time. | |
| 9 March 2006 | |
| Why do you prefer actually incorporating? What are the benefits of a single member LLC electing to be Sub S vs actual Incorporation? | |
| 9 March 2006 | |
| I don't recall, but we discussed this at a tax seminar, and some were on the side of just electing to be taxed as an S...I'll defer to some other opins. But here's some things to think about. Suppose you elect to be taxed as a S and you haven't actually inc'd. Do you need to file PR tax returns? Dunno. Maybe. Probably? But if you don't...bad things will likely happen. That kind of stuff would drive me crazy. Like half man and half woman. Pick one. | |
| 9 March 2006 | |
| Usually the benefits of electing to treat the LLC as a corporation and electing S status is that the client comes to you with LLC in hand because the attornies seem to love them. But no one has discussed with them the taxation of Sch C (or partnership, if multiple members) vs S corp vs C corp. So having explained the differences (primarily SE/FICA tax savings potential as an S corp) they decide they would like to be an S corp. So you make the elections.
However I was in classes in December and one of the instructors, a tax attorney, contended that LLC's electing S treatment were malpractice lawsuits waiting to happen. I don't remember all of his arguments, but the one I do remember is that when you look at the typical LLC agreement, there are "partnership-like" provisions which could result in there being construed to be multiple classes of stock resulting in termination of the election. With regard to JR1's questions in his previous post, yes, if the LLC elects to be treated like a corp, then it must pay wages to members as a corp would to its officers, and all payroll tax returns will be required. But, in general, if the client comes to you beforehand, I agree, if you want to be an S corp, then incorporate and don't do an LLC. | |
| 9 March 2006 | |
| In the past it was an 8832, Entity Classification Election, coupled with a 2553, Election by a Small Business Corporation. It seems to me that I recently read or heard that the 8832 is no longer required, you can accomplish it with just a 2553. But I am not sure on that point. | |
| 10 March 2006 | |
| If the LLC elects to be taxed as a corporation does the due date change to March 15? | |
| 10 March 2006 | |
| What is the due date for 2006 filing? If it the 15th of March what will happen if it's filed late or can you file late? | |
| 10 March 2006 | |
| Karentax, yes, if you elect LLC to be taxed like corp, then 1120/1120S due dates are the same as for a "real" corp.
GET, I think the due date is March 15th (Going by memory which frequently fails me, so please look it up to be sure). The IRS has gotten pretty lax about making S elections, so I don't know if they are also lax with the entity election. | |
| 10 March 2006 | |
| Whether you're LLC or not doesn't matter. For tax purposes you are (in this case) S corp or C corp. 1120 or 1120s are due 03/15/2006. As a side note: S election for LLC can be done with one sweep on 2553 from sole prop or partnership. | |
| 11 March 2006 | |
| To all, if you want to elect to "S" Status, the deadline to elect if is 2 months and 15 days after the start of the taxable year - better make up your minds quickly. You can fax it in to save time. | |
| 12 March 2006 | |
| From my last communication with IRS..yes, it is required that an LLC must first file 8832, Entity Classification Election, THEN file 2553 for S Election. Deadline is in few days - Mar.15 | |
| 12 March 2006 | |
| As usual one will get different answers from the IRS. I called IRS the other day to check on status of 2553. It was confirmed in that conversation that if LLC one only needs to file 2553. I suppose it doesn't hurt to reclassify entity to Corp then elect S with 2553. | |
| 14 March 2006 | |
| This may seem like a crazy question but on form 2553 part I item C ask the state of incorporation. So if the LLC was formed in Texas but is now in Illinois. Do I put Texas or Illinois? | |
| 14 March 2006 | |
| Wherever they're currently registered. Sounds like TX and they need to register in IL. | |
