Can an LLC File a 2553?

By Eric Novinson

A LLC can elect to be taxed as a C or an S corporation. A C corporation is taxed on its profits and has to pay federal income taxes. Form 2553 allows a LLC to stop paying corporate income taxes. An LLC files Form 2553 to switch from filing as a C corporation to filing as an S corporation. Like a partnership, an S corporation can be a pass-through entity.

Filing Options

An LLC that selects corporate status for federal income taxes either files Form 2553 or Form 8832. When the LLC chooses to file as an S corporation, it files Form 2553, and when it chooses to file as a C corporation, it files form 8832. If the LLC does not file either form, the Internal Revenue Service classifies it as a partnership by default.

Time Limit

An LLC that has filed previous tax returns as a C corporation can still file a Form 2553 and select taxation as an S corporation. According to the Internal Revenue Service, the LLC must file Form 2553 at least 2 months and 15 days before it is required to file its tax return to qualify for taxation as an S corporation. The LLC can also file Form 2553 in one year, even if less than this time limit remains until it must file its current tax return, to change its filing status for the next year.

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Extensions

If the time limit expires, an LLC can file a Form 2553 and request relief from the IRS. The IRS allows a company to file this form late if certain conditions apply. If the only reason that the IRS does not classify the company as an S corporation is that it has not filed Form 2553, the IRS will grant an extension. The IRS will also grant an extension if all members who hold shares in the S corporation have filed their personal federal income taxes according to the rules for an S corporation shareholder.

Consent

Form 2553 requires consent from the members of the LLC. According to the New Mexico Bar, a corporate officer must sign the main signature line on the form. The shareholder's consent statement must include the signatures of all members who hold shares of the LLC. The company can select an effective date for its switch to S corporation filing status that is earlier than the date that it actually files Form 2553. If the company chooses an earlier date, any member that owned shares between these two dates also has to sign the consent statement.

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References

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