Can an LLC elect for S-Corporation taxation?

Different types of business entities are taxed under different structures, but the unique advantage of an LLC is its flexibility in tax structures. Businesses operating as LLCs can elect to follow the standard LLC tax structure, or the LLC can elect to use S corp tax options.

What Are the Benefits of S Corp Election for LLC?

The primary benefit of choosing election for S corp taxation under an LLC is the flexibility and limited liability of tax options. S corps are treated differently under U.S. tax law, meaning that only particular wages or other income are eligible for taxation vs. the income tax requirements for LLCs. This allows for improved tax planning, while reducing overall taxable income amounts.

Why Not Just Apply for an S Corporation?

S corporations most certainly have their benefits, and S corporation application can be a favorable option for many businesses. However, when it comes to operating an LLC that uses S corp taxation structures, you have the options to take advantage of both S corp and LLC benefits. In particular, LLCs are simpler to form with fewer filings. LLCs also limit owner liability and overall operate under fewer restrictions. Filing as an LLC but electing taxation as an S corp allows you to hybridize your benefits and find the optimal business structure that works to minimize losses.

How to Elect S Corp Status for an LLC

Before you can elect S corp status for an LLC, you need to first apply for an LLC. Once you’ve incorporated, you’ll need to file the appropriate forms with the IRS – specifically, Form 8832. For help with managing your LLC filing and S corp taxation filing status, our easy wizards can take you through the steps to ensure your forms are filed completely and accurately. For more help, reach out to one of our specialists to get the information you need to establish your business and secure your taxation status.

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