S-Corp Election
Optimize Tax Efficiency
Eco-fyle is well versed in the process and happy to handle your transition to an S-Corporation. We will make the process simple and hassle-free for you, collecting all the information and handling the paperwork quickly.
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S-Corp Election: Preparing and Filing with Form 2553
Tax advantages of S-Corp Election
Have you ever wished you could reduce the amount of tax you pay on your business earnings? With an S-Corporation Tax Election, that dream can become a reality. This tax election tells the IRS to tax your LLC or Corporation to be taxed as an S-Corporation. It is a type of tax classification. Both C-Corporation and LLCs can reduce their tax liability. When making this election C-corporation’s profits are only subject to individual income tax rates, instead of both corporate and individual income taxes (known as “double taxation). An LLC electing S-corp saves on taxes too, by sheltering business income from self-employment taxes through income splitting. Eco-fyle can help guide you through the process of electing to be taxed as an S-corporation to help you save money and hassle.
LLC Tax Savings
Single- Member and Multi-Member LLCs can elect S-corp and benefit from income splitting. Receiving payments in both in the form of a regular salary and also through profit distributions. Allowing them to save on Medicare and Social Security taxes, also known as FICA.
Experienced Team
A C-Corporation can make an S-corp election and have income is passed through to the owners instead of being taxed at the corporate rate, avoiding double taxation. Additionally, owners may qualify for a 20% deduction on business income
Frequently Asked Questions
Have a question? If you can’t find an answer to your question schedule a consultation or email us at info@eco-fyle.com.
When all is said and done, the process looks something like this:
- Your business earns revenue
- You deduct business expenses
- You pay a self-employment tax of around 15% on any profits
- You pay federal tax at various income bands
- You pay state tax on any profits
Paying self-employment taxes and governmental taxes. An S-Corporation tax election helps to combat this by reducing the amount of self-employment tax you pay.
- Your company must be a domestic corporation or LLC.
- You may only have one class of stock.
- You cannot have more than 100 shareholders.
- All shareholders must be U.S. citizens or legal residents
- Allowable shareholders are individuals, certain trusts, and estates.
- Unallowable shareholders are partnerships, corporations, or non-resident aliens
To make the election to reclassify as an S-corporation your must file form 2553 with the IRS. Some states requires a separate filing at state level.
The time for filing Form 2553 will depend on whether your LLC is newly-formed or already existing.
- For newly-formed LLCs: You have to file within 75 days of business formation (filing date) in order for the changes to take effect in its first tax year.
- For already-existing LLCs: If you want to make your LLC’s S-Corp status effective for a given tax year, you have to file Form 2553 within 75 days from the beginning of that year.
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Need additional assistance?
The team at Eco-fyle is eager to meet you and help you pursue your goals of
incorporation. Request a consultation with one of our specialists!