How to Reactivate a Dissolved LLC

By Jane Haskins, Esq.

How to Reactivate a Dissolved LLC

By Jane Haskins, Esq.

Corporations and LLCs may benefit from being taxed as an S corporation. You can elect to be an S corp by filing a simple form with the Internal Revenue Service. Once you've made the election, you'll file an annual S corp tax return and issue Schedule K-1 forms to the company's shareholders or owners.

Man looking concernedly into laptop

S Corp Requirements

To be taxed as an S corp, your business must be set up as a corporation or an LLC. According to IRS requirements, it:

  • Must be a domestic (U.S.) corporation or LLC
  • Cannot have more than 100 shareholders. If your business is an LLC, think of your LLC's owners as “shareholders" for this purpose.
  • Can have individuals, estates, or certain types of nonprofits or trusts as shareholders
  • Cannot have as shareholders corporations, LLCs, or nonresidents
  • Can own an LLC
  • Can only have one class of stock

Many small business owners make an S corp election to save money on taxes. S corps don't pay taxes at the corporate level like C corps do. And LLC owners may save on self-employment taxes if their business is taxed as an S corp.

S Corp Election Form

Because S corp is a tax classification and not a type of business entity, an S corp is formed when an existing corporation or LLC files an S corp form with the IRS.

  • For electing S corp taxation, use IRS Form 2553, Election by a Small Business Corporation. You'll use this form even if your business is an LLC.
  • Each shareholder must sign the form consenting to S corp taxation.
  • S corp filing is due two months and 15 days after the beginning of the tax year when the election is to take effect, or it can be filed anytime during the previous tax year. In some situations, you may be able to make an election after the deadline.

The instructions for Form 2553 explain where to file the form. The IRS will notify you within about 60 days if your S corp election has been accepted.

S Corp Taxes—Form 1120S and Schedule K

An S corp is a pass-through tax entity. It doesn't pay corporate income tax. Instead, its profits are reported and taxed on the owners' personal tax returns.

Even though there's no corporate tax, you must file an S corp tax return each year using IRS Form 1120S. The S corp tax return lists the company's income, expenses, deductions, and credits.

After completing Form 1120S, you'll prepare a Schedule K-1 for each shareholder. Schedule K-1 shows each shareholder's share of income, losses, deductions, and credits. Shareholders use this information to prepare their personal tax returns. You'll attach a copy of each shareholder's K-1 to your Form 1120S.

Unlike personal tax returns, the S corp return is due by March 15 each year. Form 1120S and attached Schedule Ks can be e-filed, or see the form's instructions for how to file by mail.

Other Tax Forms That Apply to S Corps

If your state has income tax, you may need to file an S corp return with your state. Rules and forms vary, so check with your state taxing agency.

If your company has employees (including owner employees), you'll be responsible for filing employment tax returns. These may include Form 941, Employer's Quarterly Federal Tax Return or Form 940, Employer's Annual Federal Unemployment Tax Return. You'll also issue W-2 forms to employees after the end of the year. An accountant or payroll service can help you stay on track with these filings.

S corp taxation benefits many small businesses, but it may not be right for you. Before you file S corp forms, talk to an accountant about the pros and cons of an S corp for your business.

 

 

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.