LLC taxed as an S-corp: Form 2553 vs Form 8832
Reviewed by the Nexus by State research team against IRS forms, instructions and the Internal Revenue Code (sources below).
An LLC that wants S-corp taxation files Form 2553 only. A timely Form 2553 counts as the election to be taxed as a corporation (Treas. Reg. §301.7701-3(c)(1)(v)(C)), and the Form 8832 instructions say not to file Form 8832 for an entity electing S status.
Why Form 2553 is enough
By default, a single-member LLC is disregarded and a multi-member LLC is a partnership. To be an S corporation it must first be classified as a corporation. The regulations treat an eligible entity that timely elects S status as having elected to be an association (a corporation) from the S election date, provided it meets the S corporation tests on that date. The Form 2553 instructions say such an entity “doesn’t need to file Form 8832”.
When Form 8832 does apply
- The LLC wants to be a C corporation, not an S corporation. Form 8832 alone, line 6a.
- The LLC wants corporate taxation to start before S status does. Form 8832 sets the earlier corporate start date; Form 2553 then elects S status from its own date.
- The LLC already filed Form 8832. It is already a corporation for tax purposes and files Form 2553 alone.
Form 8832 timing
A classification election cannot take effect more than 75 days before the date it is filed or more than 12 months after. An earlier date needs late classification relief (Rev. Proc. 2009-41). The IRS lists only mailing addresses for Form 8832 (Kansas City or Ogden), no fax numbers, and its state lists differ from Form 2553’s: Tennessee, for example, mails Form 8832 to Ogden but files Form 2553 with Kansas City.
The 60-month limit
After an entity changes its classification by election, it generally cannot change it again by election for 60 months. The deemed corporate election that comes with Form 2553 is subject to that limit. The limit does not apply when the earlier election was made by a newly formed entity effective on its formation date.
Filling Form 2553 as an LLC
- Item B is the date the LLC was formed; item C the state of formation.
- Column L takes each member’s percentage of ownership instead of a number of shares.
- One class of stock means every member has identical rights to distributions and liquidation proceeds. An operating agreement with preferred returns or special allocations needs review before electing.
A late LLC election
Because the classification election is late too, relief under Rev. Proc. 2013-30 also needs the Part IV representations, including that the LLC filed every return as an S corporation or has no return due yet. See late election relief.