LLC taxed as an S-Corporation
Generally speaking Form 8832 is not needed to first elect to be taxed as a C-Corporation and then followed with the election to be taxed as an S-Corporation.
After electing to be taxed as an S-Corporation, the LLC may later relinquish its S-Corporation status by filing Form 8832 and choosing a different tax classification. But it is unclear what happens if the LLC inadvertently loses its S-Corporation status due to some prohibited event happening (such as eventually issuing a 2nd class of stock). Does it revert to C-Corporation status? Or rather, does it revert to a Partnership or Sole-Proprietorship?
- To elect to be taxed as an S-Corporation, the LLC must meet the following requirements:
- Be a domestic (U.S.) LLC
- Have only allowable owners, who:
- May be individuals, certain trusts, and estates and
- May not be partnerships, corporations or non-resident alien shareholders
- Have no more than 100 shareholders
- Have only one class of ownership interest (e.g. one class of stock)
- Not be an ineligible LLC (i.e. certain financial institutions, insurance companies, and domestic international sales corporations).
- The LLC can be managed by all of the members or any one (or more) managers.
- A manager may be a member but it is not a legal requirement to be a member.
- Any member who is a manager or otherwise is active in the LLC's operations, generally must be paid a reasonable salary.
- The LLC can be formed and registered in any U.S. State.
- The LLC needs to have a registered representative located in its state of formation for delivery of legal service.
- The registered representative can be a professional firm that acts as the registered representative for thousands of LLCs, or it can be one of the owners of the LLC, if that owner is a legal resident of the state.
- The LLC needs to be registered as a foreign entity in any other state where it has nexus (nexus generally means owning property or having workers or sales-people physically within that state).
- The LLC also needs to have a registered representative located in each other state where it is registered as a foreign entity for delivery of legal service.
New Jersey and New York do not follow the IRS in this regard. If the LLC will be filing income taxes with New Jersey (as a domestic LLC or a foreign LLC or an unregistered LLC), Form CBT-2553 needs to be filed if S-Corporation status is also desired for the state. Otherwise New Jersey will tax the LLC as a C-Corporation.
If the LLC will be filing income taxes with New York State (as a domestic LLC or a foreign LLC or an unregistered LLC), Form CT-6 needs to be filed if S-Corporation status is also desired for the state. Otherwise New York State will tax the LLC as a C-Corporation.
New York City does not allow S-Corporation status, rather the LLC is taxed as a C-Corporation.
Other states may have their own little twists on S-Corporation status. You need to check for current developments with GA, MS, OH, PA, WI & UT. Also, NY and UT may require a copy of IRS Form 2553 to be sent to them.
See this link for making a late IRS S-Corporation election.