Can an LLC file taxes as S corp?

Yes, in the United States, a limited liability company (LLC) may elect to be taxed as an S corporation for federal income tax purposes. This means that the LLC will be taxed similarly to a partnership, with the profits and losses of the corporation passed through to the members and taxed at the individual level.

To elect to be taxed as an S corporation, the LLC must file Form 2553, Election by a Small Business Corporation, with the Internal Revenue Service (IRS). The form must be filed by the 15th day of the third month of the tax year for which the election is to be effective, or by the 15th day of the third month of the tax year in which the LLC was formed.

It’s worth noting that not all LLCs are eligible to be taxed as S corporations. To qualify, the LLC must meet certain requirements, including having no more than 100 shareholders and only one class of stock.

LLCs that do not elect to be taxed as S corporations or that do not qualify for S corporation status will be taxed as partnerships or sole proprietorships, depending on the number of members.

It’s worth noting that the rules for LLC taxation may vary depending on the jurisdiction. LLCs should consult with their tax advisors and local tax authorities for more information about the rules for LLC taxation in their specific jurisdiction.

In addition to electing to be taxed as an S corporation, LLCs may also elect to be taxed as a C corporation. C corporation taxation is different from S corporation taxation in that the profits of a C corporation are taxed at the corporate level and any dividends paid to shareholders are taxed again at the individual level.

It’s important for LLCs to carefully consider the pros and cons of electing S corporation or C corporation taxation before making a decision. Factors to consider include the potential tax consequences for the LLC and its members, as well as the potential administrative and compliance costs of operating as an S corporation or C corporation.

Prominent Financial Consultants offers a range of services to help our clients succeed, and we would love the opportunity to discuss how we can help you. If you would like to schedule an appointment with us, please schedule a free 15 Minute Financial Clarity Call so that we can learn more about your needs and goals or schedule your tax appointment here.