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2 Replies Latest reply: Apr 22, 2009 12:00 PM by dublincpa RSS

start out as an LLC, then...

dooncry Newbie
Currently Being Moderated
I am trying to fill out the business registration form,
and I'm not sure if I want to choose the S-corp option yet.
Can I start out as a SMLLC and then choose to be taxed as an S-Corp later on?
Is there a time limit on the change? Or can it be decided at tax time?

Any insight would be appreciated.

  • Re: start out as an LLC, then...
    Lighthouse24 Master
    Currently Being Moderated
    I'm not an accountant, but I believe the S-corp election must be filed before the 16th day of the third month of the tax year in which you want the S-corp status to take effect. Best wishes.
    • Re: start out as an LLC, then...
      dublincpa Apprentice
      Currently Being Moderated
      Lighthouse24 is correct about when the initial election should be made if you want to be an S from day one. There are very generous late election rules, but I prefer to avoid them rather than rely on them. There is a lot of abuse with after the fact tax planning as a result of those rules. That said. Ya gotta do what ya gotta do.

      If you want to spend your first year or two as a SMLLC sole proprietor, you can always make the S election at anytime without tax consequence. Pretend you have been in business for four years. You decide you want to be an S corp now. You can make your election effective March 1st 2009 by filing it prior to May 15 2009. You would have two months of Schedule C and ten months of 1120S.

      Just be sure you have thought it through before making an election. Going back can be a tax nightmare.

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