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Level 2
March 8, 2024
Question

S Corp Election for LLC

  • March 8, 2024
  • 2 replies
  • 19 views

As a pass through a client must file a SCH C with their 1040. If they elect to become a S Corp filing form 2553, does this mean they have to file an 1120 for their business tax moving forward? 

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2 replies

qbteachmt
Level 15
March 8, 2024

A sole prorietorship is a disregarded entity; self and "company" are the same entity. That business activity is filed on Sched C which is part of the individual's Form 1040 tax return. A single-member LLC also is a disregarded entity and the same as sole proprietorship, for purposes of the Feds. LLC is a State construct.

Electing to be treated as an S Corp means there will be payroll and other entity change consideration issues (example: you don't take draws). The income tax filing for an S Corp is Form 1120 S. C Corp is Form 1120. HOA is Form 1120-H. These are entities independent of their shareholder-taxpayer owner. A C Corp pays its own taxes. A S Corp is a pass-through entity. A Partnership (multi-member LLC) files on Form 1065 and is a pass-through entity.

Note Form vs Schedule.

Hope that helps.

Don't yell at us; we're volunteers
Level 2
March 19, 2024

A business return would need to be filed thereafter. As to which business return, please refer to the following IRS documentation. https://www.irs.gov/businesses/small-businesses-self-employed/llc-filing-as-a-corporation-or-partnership#:~:text=However%2C%20if%20a%20qualifying%20LLC,Form%201120%2DS)PDF.