Discussion Archives:Entity election in error - revert to disregarded entity

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Discussion Forum Index --> Advanced Tax Questions --> Entity election in error - revert to disregarded entity


Discussion Forum Index --> Tax Questions --> Entity election in error - revert to disregarded entity

Taxlife (talk|edits) said:

2 June 2008
I have an LLC client- incorporated in 2006, took the entity election, filed 1120 for 2006 with negligible activity. In 2007/2008 we wanted to get him S corp election, client had a foreign investor and therefore did not qualify. The investor thought that his lawyer said visa status qualified, I finally connected with the lawyer and now the lawyer thinks that the entity should be a partnership as his client does not qualify. What are my options? How can I revert to the disregarded entity status? or Can I for the 2006 and 2007 years or only for 2007 years. Anyone with similar experience and what did you do?

Thanks

Kevinh5 (talk|edits) said:

2 June 2008
did you read the instructions to the form?????

Kevinh5 (talk|edits) said:

2 June 2008
also, you may want to fill out your profile and work on the terminology. You don't 'incorporate' an LLC, you 'organize' an LLC. The LLC makes an election to be taxed as a Corp, and/or makes an election to be taxed as an S corp.

Smktax (talk|edits) said:

2 June 2008
You are likely stuck with corporate status for 5 years. Your best bet may be to start a new entity and liquidate the old entity (hopefully it doesn't have any appreciated assets already). If you do convert to an LLC treated as a partnership, be sure to look at Forms 8804, 8805, and 8813. In addition, the foreign investor will be required to file a U.S. tax return (1040NR for individuals and 1120-F for corporations). If you retain corporate status, the LLC may need to file Form 5472.

Taxlife (talk|edits) said:

3 June 2008
Smktax-thanks. I will use the forms that you indicated if I manage to convert to an LLC treated as a ptp. The 5 year conversion rule does not apply to new entities that made the election (see page 5 note under Line 2a and 2b instructions). However, I wanted to find out if there was any other alternative in case of error as I did not want to make the election and leave the initial years losses unutilized by the corp.

Also, any thoughts on the best way to convert to LLC treated as ptp?

Kevinh5 - appreciate your comments.

Marcilio (talk|edits) said:

3 June 2008
What's a PTP? I use that acronym for Publicly Traded Partnership.

Taxlife (talk|edits) said:

3 June 2008
Sorry - I was using ptp for partnership.
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