How to Change LLC to S Corp Tax Status || tutorial of IRS form 2553 to elect s corp status
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- Опубліковано 24 сер 2024
- (Per request from Patreon supporters!!) Do you have a limited liability corporation (LLC) and you'd like for it to be taxed like an S Corporation? This can be the best of both worlds, so you have the simplicity of an LLC with the tax benefits of an S Corp. In this video, I share a tutorial walkthrough of how to fill out Form 2553 and change the tax status of your LLC.
IRS Form 2553: www.irs.gov/fo...
S Corporations Generally: www.irs.gov/bu...
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Thank you so much! I was a little confused while filling out Form 2553 but you answered all my questions! 💜
Glad it was helpful!
YOU ARE AMAZING!!! I LOVE THE WAY YOU EDUCATE & INSTRUCT! NOT EVERYONE HAS THIS SKILL!! THANK YOU SO MUCH!
You are so welcome - great to hear!
Thank you! You saved me $500 for something that just took 20 minutes to complete. I appreciate you!
Great to hear!
Great video! Thanks for a very clear, to-the-point video on filing this form. I'm sure this won't be the last video of yours that I watch!
Glad it was helpful!
thanks E. this helped me way more than the IRS agent i talked to. she didn't even know what the form as about. she said she didn't know that i can fax this. she said it needs to be mailed and will definitely take a minimum of 30 days to even look at. all I'm trying to do is change from LLC to s-corp. i was told to use this form
Glad to hear it helped!
Thank you! This is great content.
Thank you, I was losing my mind to figure this form out and you made it so easy!!?
Glad to hear!
4:13.... you just answered my Q lol "it's the same Form". Got it.
So clear, concise, and detailed. You’re easy to listen to and follow. Thank you!
Awesome, thank you!
I now have a better understanding about electing the S-Corp status. Thank you so much for this video!
Glad to help!
This was AMAZING, step by step detail, plus simple tips! Easy to listen to as well. Thank you so much for sharing!
Glad it was helpful!
Thank you so much Elizabeth!!! This was an excellent straight to the point video that solved my problem.❤❤❤
Great to hear, thanks!
you are a life saver, I was sooo confused as to what needed to be done regarding this form and this process. Thank you so much!
You're very welcome!
This is BEYOND helpful. Thank you so much. You saved me time, money, energy, and having to interact with other people lol. Your personality is super cool too :)
Glad it was helpful!! :)
Thank you so much!!! I set up the LLC and EIN myself and was having such a hard time with this form.
Glad it helped!
Thank you so much Elizabeth, you're the best!
You are so welcome!
Thank you!! 🙏
Thank you, thank you, thank you!!! Your explanations and follow along directions were soooo helpful. You rock!!
You're welcome!!
Wow!!! Exactly what I’m looking for. Very helpful! God bless you!!
Glad it was helpful!
Thanks!
Welcome! And thanks for helping out the channel! :)
Your amazing! love your videos! So so informative!
Glad you like them!
Thank you for this wonderful video! You helped to clarify this form for me and prevented me from making several mistakes.
Glad it was helpful, great to hear!
Thoroughly explained.
Glad you think so!
Thank you I’m doing this right now .
Great - hope it goes smoothly!
Thank you very much for your work with this video. It was very helpful!!
You're very welcome!
Hello Elizabeth, Thank you for your videos!!!!!!
You are so welcome!
You're a lifesaver! Thank you!
You're welcome!
Awesome, thank you Elizabeth!
You are so welcome!
Great video. Helped tremendously.
Great to hear!
Great stuff. I was very confused. not i am clear.
Great to hear that it cleared stuff up for you!
Thanks so much for this. You’re so great!
You are so welcome!
Very useful information, I just subscribed. 🏆🥇
Great, thanks!
Check this out to explain LLC vs S Corp vs C Corp (legal entities and tax status): ua-cam.com/video/M2rD-wUcCrc/v-deo.html
You the REAL MVP! Thank you!
Welcome!!
Great video and thank you for sharing.
Welcome!
great video this really hwlped me and saved me money
Great to hear!
Thank you so much for making this video. 🙏🙏
Welcome!
Well done! Thank you
Welcome!
Thank you! This helped Immensely!
Glad it helped!
Thank you so much for this video - this helped a lot!
Glad it helped!
Thank you for this video!
You are so welcome!
So hlepful! I just saved myself $100:))
Great to hear!
3:10 Thank you for your video! It helps me a lot. However I would suggest you to clarify about the “Resident Alien” definition because by “Substancial Presence Test” a Non-Green Card holder can still being considered a Resident Alien (for tax purposes and no immigration purposes 😊)
That's a good point, it is a bit more subtle/complicated (here the link for anyone reading this - www.irs.gov/individuals/international-taxpayers/substantial-presence-test ). Really anyone should talk to both their immigration attorney (if applicable) and their tax person, to make sure it is all done right, since it is a bit complicated and not a good thing to get wrong.
just amazing
1!!!!
Elizabeth - do you have a video on calculating basis when moving from an LLC o an Scorp? My son's single member LLC (which has existed for 3 yrs) is converting to scorp in 2024. I have seen lots of videos on the importance of calculating basis but am not sure how that works in his case. thx - your videos are great
Sorry I don't, calculating basis fries my brain and I rely on accountants for this!
THANK YOU.
You're welcome!
Thank you!
Welcome!
This was so incredibly helpful! We are trying to do as much of our administrative/accounting duties as possible for our LLC and there is so little guidance from the actual government agencies that handle these matters.
I would like to fax our form in so it can be processed as quickly as possible but we don’t have a landline. Do you know if the IRS has any issue accepting faxes from online services like eFax or RingCentral?
I've used the online fax services for IRS filings and it seemed to work fine.
@@ElizabethPW Fantastic, thank you so much!!
This is an amazing video, thank you so much! Just in case you see this question soon and know the answer: my LLC is single-member, but after I convert to S-corp I need it to run as 50/50 ownership with another person. Should I first convert as single member LLC and then add a new owner, or add a new owner to LLC first, and then convert as multi-member LLC to multi-owner S-corp? Cheers!
Hm I'd probably file the election paperwork first and then bring in the second owner
Hi Elizabeth,
Your videos are a true blessing! I've already learned so much from watching your videos.
One question I have specific to California LLCs opting for S-corp tax staus with Form 2553 is if the business is subject to paying both the $800 fee via "Form 3522: LLC Tax Voucher" and the additional 1.5% California Franchise Tax for S corporations paid through Form 100-ES as quarterly estimated tax payments? Or is the business only subject to the 1.5% California Franchise Tax?
Any insight you have is greatly appreciated!
So the $800 and the 1.5% is the same tax. What the $800 is about is that it is a minimum franchise fee tax. So when the business isn't make a lot of money, then you pay the $800. Then when you are making a lot more, you pay the 1.5%.
Thank you so much!@@ElizabethPW
Thank you so much!!! I faxed the form today. I am electing to be taxed as an S-Corp effective 1/1/23. While I wait for the form to be approved, can I start paying myself a salary as on 1/1/23 or should I wait until the form is approved? Thank you again!!
Typically we assume it will be approved and start running things as an S Corp. Obviously that assumes you qualify to have an S Corp (you meet all the rules, like being a US citizen or permanent resident, etc.).
@@ElizabethPW great - thank you !!
I forgot to ask - if I have 10k sitting on the bank account as an LLC should I withdraw that money before the scorp becomes effective as of 1/1/23 or can I keep it there? I wouldn't want the 10k to be considered income or be subject to additional taxation. Thank you again!!
nice content; how much should my LLC make a year for me to benefit filing form 2553
Hm generally having your LLC taxed as an S Corp isn't going to be helpful until you are making a profit of high five figures, once you factor in the costs. It does depend on the industry, your personal finances, the biz expenses, etc.
Elizabeth - this is awesome - I need late relief and will follow your instructions. I have a question - if I have a husband and wife that each have an LLC different businesses but almost similar. Two single member LLCs - so each LLC should complete the form 2553? Thank you.
Yes right
@@ElizabethPW I’m so thrilled I found your video. Anything on partnerships and scorps?
I have multiple rental properties which has its own LLC, my question is if I start an S-corp, can all of the rental properties be listed on the 1 s-corp? Thanks in advance
Yes you can put all your entities in one LLC or one corporation. It just means that all of them are liable for the others, so it depends on whether you are ok with that
I'm curious, for those that used USPS and their filings are just sitting in the pile how that impacts them when filing and what those people can do?
You operate as if you are an S Corp, in the meanwhile, and apply for relief if the original filing is not accepted
Thank you so much for this tutorial. We just formed our LLC two days ago and was concerned about the deadline to file for S Corp status. 😅 Thank you for clarifying this. 😁 Is this something that I need to do every year? Be well!
You just elect the S corp once. :)
@@ElizabethPW thank you for the reply.
Wow.. you just saved my ... Peach haha Thanks!
Happy to help!
Would it be possible for you to do a video regarding the difference between a single-member vs multi-member. I'm filing for my business EIN and want to include my husband in the business but unsure of filing as single or multi member and which one is beneficial. I understand that this is where form 2553 comes in handy, however, it is unclear to me what to do.
Ah that's a good question especially for your situation, because in some situations spouses are treated as one member
So it is better form a S-Corp verses LLC in the begining?
Generally I recommend an LLC in the beginning, versus an S Corp, unless their is a particular reason
First of all thank you for this very straight forward easy to understand tutorial. I’ve had my company since 2021. I would like to change my status to s corp for 2022. I am a single member LLC and have not paid my self a salary. Will this be possible to go and back pay the salary and appropriate taxes. Or just move forward with s corp for 2023 only.
Hm you may need to ask an accountant / business tax preparer about that. The rule for doing a "late" S Corp election is that you have to have been treating the biz as an S Corp during the timeframe, I'm not sure if paying yourself a "catchup" salary now would count or not.
Thank you so much for this no fluff video straight to the point.
For someone electing late s-corp, quarterly taxes do not come into play until the form is filed, right?
For instance someone formed an LLC in mid august, first transaction posted on 30th august still as LLC. Then electing a corp status in September will not incur any quarterly taxes for the quarter ending in august, is that right ?
Hm typically if someone forms an LLC in Aug and then files the S Corp status in Sept, they would backdate the S Corp effective date to when they formed the LLC. So then taxes would be owed via S Corp on the Aug sales. But either way, quarterly deposits are due for any kind of business entity, sole prop or partnership or llc or s corp. Many times when a biz first starts they don't need to do quarterlies at first because while they are making gross income they are not making a profit, but check with your tax person to know when you need to start.
@@ElizabethPW thank you very much
Incredible content! Thank you so much! I have a question, Will this work if I am a single member LLC and want to be taxed as an S-Corp but want to add my son as an equal partner? I was flying solo and now he works with me and want him to be an owner with me.
Well if you want to do both at the same time, you'd then add him as a co-owner (member) to the LLC by passing a resolution (that you sign) or by just making a new operating agreement that you both sign, and then file the 2553 (with both of you signing it) to convert to an S Corp
Thank you so much, that's exactly what we did today!@@ElizabethPW
Great video. How is someone able to change the S corp back to an LLC?
If you have an LLC that is taxed as an S Corp, you can make a different tax election. But if it has been less than 5 years since the original election was made, you need the IRS's permission to change it back (to sole prop or partnership). Here's the rule on that: www.law.cornell.edu/cfr/text/26/1.1362-5
Hi! I just filled out this form (2553) and it seems it's for "incorporated entities" not "LLCs".... is this the same thing / am I splitting hairs? I was thinking there would be a form specific to LLCs as this form seems specific to "corporations". Thanks!
If I formed my LLC and purchased an auto shop one month later, what date would I use on “L Dates Acquired”? The closing date?
Hm I'd think it would be the date you acquired the LLC but I'd ask the IRS to be sure
Hey are you saying (when you said) “ I haven’t had to call that number to see if it works in getting any help” if you haven’t had to call because you normally get an answer inside of 60 days? And, will my EIN not reflect that I am an scorp until they have processed this form?
Great video I filed articles of organization October 25 so item line E was very intimidating until I watched your video. Thank you so much for this.
Generally the back-up rule is that you proceed as if it is an S Corp and file/pay taxes that way, and you can make a late election if it got lost along the way
why do you skip form 8832? Apparently this is needed also if you want to have an LLC that is a separate entity from you.
No you don't need 8832, the IRS assumes that it is making the corporate election for 8832 www.irs.gov/instructions/i2553#idm139855003756416
Hi Elizabeth if I have selected address change in section D where do I indicate my address change .
Oh you just put in the new address and then they know it is a change because you checked the box
Let’s say once’s this process is done, and I (single business owner) start to pay myself. What would be the best way to go on about that? Just a simple bank transfer? Create invoices for my self?
I have some videos on that:
ua-cam.com/video/cv_cXHVa0xU/v-deo.html and ua-cam.com/video/UTwQ-THsdFM/v-deo.html
@@ElizabethPWyou awesome
Thanks!
Thank you for that information, it was very helpful. After filing form 2553 with the IRS what steps to I need to follow at the state level? Do I need to file new articles of incorporation, new statement of information? Your response would be very helpful. Thank you!!
In California, you don't change the LLC forms when you elect to change the tax status (unless you changed other stuff too). CA goes along with the IRS tax status in this case
Thanks for the information. What is the difference between forms 2553 and 8832. They look similar
They are similar. Form 8832 is for any business entity to elect to be treated as a specific kind of other entity for tax purposes - like a partnership to be treated as a corporation. But that would have you being treated as a C Corp not an S Corp. So the 2553 elects for any corporation-tax-entity to be treated as an S Corp. When you're an LLC and you file the 2553, the IRS assumes that you want to be treated as a corporation that's an S Corp, so you don't have to also file the 8832.
Thanks for the wonderful video. This video is exactly what I was looking for. I have a question. I registered a single member sole proprietor LLC in my state for locum physician work in February 2024 but did not register it with IRS. I registered it with IRS and got EIN in July 2024. I would actually start working through my LLC after I registered with IRS and got EIN this month. Now I want to elect S-Corp by filing 2553 form. What would be the date of incorporation on form 2553? Would it be the date when I registered LLC with the state(Feb 2024) or it would be the date when I registered with IRS and got EIN(July 2024)? Would it be considered a late election of S-Corp if I file 2553 within a 2 weeks after getting EIN in July 2024 but it is around 5 months after the LLC was registered in the state?
The date of incorporation is Feb 2024. Yes it is a late election if you want it to be for 2024.
@@ElizabethPW Thanks so much for responding. At this point, what date I should/can choose for item E part I as the date of beginning of tax year. My LLC will become functional from the end of July 2024. Can I choose date of 7/10/24 as the beginning of tax year for item E(it is the same date when I applied for and got EIN for my LLC). Thank you so much for your help!
Thank you for this content it was amazing and exactly what I needed… My only question is: If I have my single member LLC with its EIN # but I want to convert to S-Corp, do I need to apply for a new EIN? Or can I keep the one I already have? And send the form 2553… Thanks again
If you have the LLC taxed as an S Corp (it's not converting, it is just "electing" it to be taxed as an S Corp via 2553), then you keep the EIN.
Thank you. Do I have to fax them all 4 pages, even if I only used the first 2?
Yes, fax all 4 - otherwise they don't know they are blank, they may think the last two pages were lost etc
First of all thank you for sharing your knowledge, can you tell me if this application needs to be done every year or only once in the llc company’s life time, tanks again 😊
Just the one time!
Thank you so much !!!
Thank you for the information! In regard to the Name and EIN at the top of each page, must one enter that Information even if that section (or part) isn't applicable to the entity. For example, I am applying for the new tax status based on the calendar year. According to your wisdom, I wouldn't need to fill out Part II. Do I still need to include my LLC's name and EIN number on every page? And does every page need to be submitted?
Yes you'd want to submit all the pages with the basic info, even if they don't apply to you -- otherwise the IRS may think the pages were just lost. They need to know the pages are blank
Hi Elizabeth, thanks for the video. Do you think there's a downside to faxing and also mailing the form?
Hm I have never done that, I guess the problem is that it means more paperwork generally they have to go through. My understanding is that the fax will be processed faster than mail
Hi Elizabeth
Thank you so much for your video it is very informative and helpful
I have a quick question
if I am single member LLC and I elected to be taxed as a S corporation. Is the LLC is now considered a regarded entity for tax purposes and can I use the LLC’s EIN instead of my SSN in this case!! I mean by filing the S corp election is now making the disregarded LLC with a single owner as a regarded one right? I mean it’s now separate from its owner right?
If the LLC elects to be taxed as an S Corp, yes you'd get an EIN for it and that is what would be used when it files a tax return
@@ElizabethPW Awesome thanks for your help
Hi thank you for this. this was very helpful. I am currently a sole proprietor of my small one man pet care business but I think I want to become an LLC and then file as an S-corp. I have no shareholders. As the business owner, am I considered to be the only shareholder? Do I need to have other shareholders to qualify to be an S-corp? Do I need to be a LLC first or can I just become an S-corp? I would love to find a way to save in taxes. The extra 15% of self employment tax is killing me now that I am making more money. I am trying to figure out the investment cost of doing this status change verses how much I will save in taxes and if it makes sense for me. Thanks
Yes, if you are the only owner then you are the sole shareholder. You don't need anyone else to be an owner. Yes, you can just be a corporation that is taxed as an S Corp, if that makes more sense to you. Either way, the S Corp status is what will help with tax planning -- just make sure you budget the savings versus the additional cost of the S Corp (like hiring a tax person to do the S Corp taxes).
What if I need to do the opposite?!
I recently filed as a corporation for my brand new business in Florida and I put my husband on it as VP.
How do I convert that to an LLC in only my name?!
There’s been no business transactions at all yet. I don't want to lose my biz name, but I realize that I definitely needed to be a single member LLC and not a corporation with a President and Vice President. I need to fix this problem so I can get started in the business!
What you are wanting is to "convert" your corporation into an LLC. Here's an article about that: www.upcounsel.com/how-to-convert-a-corporation-to-an-llc-in-florida
My llc was approved on June 3rd and I filed for this year S Corp but they gave me from next year onwards..saying I was late fr the starting of the year-Jan 2024. Do I file another 2553 with my reasons to be late and have them look at it again? Your help you be very much appreciated. Thanks
You could try with filing out the forms but this time include what you need to state for late filing
Hello, I formed an LLC/S-corp. Last year was my first year of business. I am making most of my money this year. Why does everyone want to charge me an enormous amount of money to do the LLC/S-corp tax return? I am on cash basis. They want to charge $1,500!! I have a degree in accounting. I have always done my own taxes. Is there a video you recommend that will show how to complete an S-Corp return 1120s. I don't understand how I get from from the 1120s to K-1 for the LLC.
This guy ua-cam.com/video/92k07jVR7vk/v-deo.htmlsi=9nQQPXwHIiz8snd7 has a series of tutorial videos
Question - In the name and address in Part I (that captures the % ownership), does this address need to be individual's home address or could it be the address on the legal entity (which is of the registered agent). Thank you!
It's a mailing address so you just need to use an address where you can get mail. Some RAs may accept mail for the owner, and some may not.
Thank you for the video! 2 QuestionS: My LLC was formed 06/18/2022, on Part I section E it should be 08/31/2022 (2 months and 15 days latter)? Or could be 6/18/2022?
While I wait for my S-Corp approval, do I need to start doing payroll or I should wait? Thank you!
Most of the time you want the "beginning) date to be when you created the LLC, so there's no timeframe when the LLC has a different tax status. Typically, once you file the S Corp election you then treat your biz as if it was granted (doing payroll etc).
@@ElizabethPW Thank you!
2 more question lol.
One reason to add of late filing could be that LLC was incorporated after March 15 2022?
For late election, do I need to put on top of the first page “Filed pursuant to rev. proc. 2013-30” ?
Thank you in advance!
Elizabeth, can a manager managed, single-member LLC qualify to be elected as a S-Corp if there's only one person running the LLC? I read somewhere that the company has to have more than one person in the company to qualify. Thank you for sharing!
Yes an S Corp (or an LLC that's taxed as an S Corp) can have just one owner
@@ElizabethPW Thank you, Elizabeth!
Question: if page 3 and 4 are not applicable do I still need to fax those in? Thanks!
yes, otherwise they reject for missing pages
Thank You so much. My question is if we fax it. How do we get a response? I don't have fax at the moment. I am going to fax it from Fedex place.
They will mail the response to you.
@@ElizabethPW Oh thank you 👍
Hi, I’m preparing this form for one of my tax clients, this is my first time doing it and Thankyou makes this very simple. My question is, as I do all his paperwork but I’m not legally assigned as a manager or officer can I still sign the first page and put my information there? He doesn’t want IRS to call him directly if they have additional question.
The instructions state: "Form 2553 must be signed and dated by the president, vice president, treasurer, assistant treasurer, chief accounting officer, or any other corporate officer (such as tax officer) authorized to sign." - so you'd need to be a corporate officer
@@ElizabethPW make sense Thankyou.
In regards to filing in a community property state, does the other spouse still have to sign as a consenting spouse in Part 1 Section J-N even if only one spouse is listed as the sole member of the SMLLC?
Hm my understanding is that for the IRS form 2553 it is just the spouse(s) that have ownership shares - the IRS doesn't care much about it. It is more of a state law thing where the spouse can challenge shares being sold or altered without consent (typically when sold for less than fair market value or given as a gift). Spousal consent tends to be overdone but it would be good to have "spousal consent" in writing just in case, since not really hard.
@@ElizabethPW Okay, as always THANK YOU. You're amazing
Hello and thank you for all of the info you share! I’m a little unclear as to how to handle my tax filing for 2022. I’m a sole proprietor LLC and I want to make the switch over to S-Corp. I know the IRS is backlogged but would that prevent me from filing my 2022 taxes as an S corp instead of an LLC? Thanks again!
You can file the form to have the biz be treated as an S Corp for tax purposes, if you meet the requirements to file the election late. Yeah the IRS is behind so you won't get a response before you need to file. Typically what you'd do is file the election form and the tax return, assuming S Corp status, and hope that it works out. If not, then you'd try to fix what wasn't right on the form.
Hi Elizabeth,
How long does it take to hear back from the IRS. I faxed the form on 2/22/2024, but haven't seen anything in the mail from them yet.
Not sure but it does not surprise me - they are very behind and it is tax season
Thank you so much. Do I have to issue a class of stock on the stock market to be elected as a S Corp?
No, you don't need to list it on the stock market (actually you can't do that with an S Corp). You just need to issue stock to the owner or owners.
@@ElizabethPW Thank you so much for your reply. How do I issue stock to the owners? Just fill out numbers of members on the Form 2553 on part 1 page 2 and fax to IRS? Is the only thing I need to do to change my LLC to S Corp is sending 2553 to the IRS and then I can file my tax return as S Corporation? Thanks in advance!
Can you talk about corp code that motor vehicle ask for when purchasing a vehicle. Did my llc and I didn't know what a corp code was till I went to get my plates and registration.
Hm did they say the number of the corp code? Like corp code section 17701.1 etc?
2 more question lol.
One reason to add of late filing could be that LLC was incorporated after March 15 2022?
For late election, do I need to put on top of the first page “Filed pursuant to rev. proc. 2013-30” ?
Thank you in advance!
I don't think filing after March 15th (the tax deadline) is the reason - it would be more that you intended to have it be an S Corp, have done everything as if it was, and are just now realizing that you need to file this form. Yes the instructions on page 2 do say to put that in the margin - www.irs.gov/pub/irs-pdf/i2553.pdf
Can this form be sent with the 2023 tax return (eFile) if done before March 15, 2024? Also, does this mean that the 2023 return should be prepared using the 1120s and a K-1?
So the rule is "No more than 2 months and 15 days after the beginning of the tax year the election is to take effect" but you can also file late if you make the late election. Yes I think people do commonly file it with their tax return and then you do the 1120 and K-1 for that tax year
Hi, for the company’s address on form 2553 do I list the virtual mailing address or the registered agent’s address or the physical location from which I am operating my online business from?? Thank you in advance 🙏
For the address it is the mailing address, where you want mail from the IRS to be sent
If we elect for S corp status with IRS do we need to do the same with the state or just the one form 2553? I am in california
In some states you do but not in California
hi thank you for this question if the other two forms don't apply must we sent them out as well or just the first two?
Include the last two pages -- otherwise the IRS might think they are just missing or lost
Question? Does the Business name change to corp once the transition is made from LLC to S Corp or is that just for tax purposes?
It’s only for tax purposes. It’s still an LLC
how do i check the status of my 2553 s-corp application
They don't have an online way to check - you can try calling IRS Business and Specialty Tax Line (800-829-4933) but it can be hard to get through.