Hi,

My LLC was incorporated in 2015 and elected as S-CORP for tax filing by filing 8832 & 2553. I filed 1120S for year 2015. I am about to file returns this year and had below questions.

1. Should I have filed form 8832/2553 for tax year 2016 in 2016 ?
2. Do I need to file form 8832/2553 every year ?

Appreciate any help, thanks.


PG

1. Should I have filed form 8832/2553 for tax year 2016 in 2016 ?===>You need to Complete and file Form 2553 no more than two months and 15 days after the beginning of the tax year of 2016 the election is to take effect, or At any time during the tax year preceding the tax year it is to take effect.
For this purpose, the 2-month period begins on the day of the month the tax year begins and ends with the close of the day before the numerically corresponding day of the second calendar month following that month. If there is no corresponding day, use the close of the last day of the calendar month. If you file Form 2553 late, your election to be an S-corp becomes effective the next fiscal year. However, if you qualify, you can file late and make your S-corp election retroactive using IRS Revenue Procedure 2003-43. Your corporation will qualify to file Form 2553 late.


If you have more than one member, you are by default classified as a partnership for federal tax purposes, and you do not have to file the 8832. Therefore, you can make an S election by filing ONLY Form 2553 without also filing Form 8832. Moreover, if you elect to be taxed as a corp on Form 8832, you are electing to be taxed as a C-corp, not an S-Corp.


2. Do I need to file form 8832/2553 every year ?===>No; Form 2553 must be filed by the 15th day of the third month after a startup's fiscal year in order for the s-corp election to be applicable for that year.

@Wnhough - Thank you so much for the comprehensive reply. I am the only member/owner of LLC but have another employee (no ownership), I presume that doesnt count as member. Sorry if I sound silly, I am still not clear whether I have to elect S-CORP every year for tax reasons or is it just once when LLC was formed. LLC was formed in Aug-2015 and same time S-CORP election was made. Please let me know.

#1;Correct the EE is not a member/ partner but just an employee of your SMLLC


#2; as said previously, No not every year it is just once; then your LLC is not a MMLLC but it is a SMLLC just like a sole ownership of disregarded entity, so in your case, to covnert to an S corp you need to close your SMLLC;Converting ayour SMLLC to an S corp can be done in two ways. The first is to dissolve the SMLLC and transfer all assets back to the individual member/owner, then form a new S corp and contribute the assets from you to the new entity of an S corp. This involves filing a new entity and the expenses involved at the state level.
Another way is to simply elect the entity be treated for federal tax purposes as an S corp, while the entity remains an SMLLC under state law. This involves making a tax election with the IRS, preparing a resolutions, and amending the SMLLC operating agreement to conform with the new tax election. Some states do allow a conversion at the state level from a SMLLC to corp, but this may not be necessary.

Many people mistakenly set up a single member LLC when they should be using an S corp. They often do this because it?s presumably easier to create and run an LLC over an corporation. While this may be true, the extra paperwork is worth it for the tax benefits of using an S corp.



NOTE; you may use IRS Form 2553 to elect to be an S-corp. For the election to take effect in the current tax year, it must be filed not more than two months and 15 days from the beginning of the tax year. Otherwise, the election will take effect in the following tax year. You must file Form 1120s as the tax return for the LLC in the tax year in which your election for S-corporation treatment takes effect.

@Wnhough -- Thanks again for the reply, appreciate it.