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Hi Tax Professional, If a LLC operated for couple years,

Hi Tax Professional, If a LLC...
Hi Tax Professional,

If a LLC operated for couple years, and they would like to elect as C-Corporation tax treatment, is it possible to do it?

Thanks!
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Answered in 8 minutes by:
5/1/2013
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,689
Experience: Taxes, Immigration, Labor Relations
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LEV :

Hi and welcome to Just Answer!
Yes - that is possible.

LEV :

A Limited Liability Company (LLC) is a business structure allowed by state statute.
Depending on elections made by the LLC and the number of members, the IRS will treat an LLC as either a corporation, partnership, or as part of the LLC’s owner’s tax return (a “disregarded entity”).
An LLC that does not want to accept its default federal tax classification, or that wishes to change its classification, uses Form 8832, Entity Classification Election, to elect how it will be classified for federal tax purposes.
Election may be made any time.
Generally, an election specifying an LLC’s classification cannot take effect more than 75 days prior to the date the election is filed, nor can it take effect later than 12 months after the date the election is filed.
See here - www.irs.gov/pub/irs-pdf/f8832.pdf

Customer:

Yes, I understand. But how about the LLC already operated for like 3 years, and has filed tax returns by using tax form 1065, is it still possible to elect as C-Corporation? Or is it too late to elect at this point?

LEV :

Yes - that is possible. You may file form 8832 and change LLC's classification.
You will file a final tax return for the partnership (mark 1065 as Final) and will start filing income tax return for the C-corporation.
For easy transition - it might be more simple to change classification from January 1.

LEV :

However if you want to change election as soon as possible - you may file form 8832 now - and election will be in effect 75 days prior to the date the election is filed.

LEV :

However - if you want that election will be in effect 3 years prior to the date the election is filed - that would not be possible.

Customer:

I am getting a bit confused with the 75 days rule and 3 years rule

Customer:

could you please show me a simple example?

Customer:

thanks!

Customer:

By the way, by filling out 8832, for my case, do I have to fill out Part II?

Customer:

relief of late filing?

LEV :

Example 1.
- you decide to change your LLC which is treated as a partnership to C-corporation. The best approach would be to make such change on the year end. Thus you may file form 8832 now and ask to change be in effect from Jan 1, 2014. In this case you will file your partnership tax return for 2013 as final. And C-corporation tax treatment will start from Jan 1, 2014.
Example 2.
For whatever reason you want your change to be in effect as soon as possible. You may file form 8832 now - May 1, 2013 and request that election would be in effect 75 day prior of that date - which is Mar 16, 2013. In this case you will file a short final tax return for the partnership (form 1065) . Starting Mar 17, 2013 - your LLC will be treated as C-corporation. That is not a late filing - and no need to fill out Part II.

LEV :

I need to step out - please post all your question and I will address them later tonight.

Customer:

Thanks very much, it should be much more clear now. Just wonder if I still need to fill out Part II for filing form 8832, thanks!

Customer:

Sorry, I misread your answer, so no need to fill out part II...got it

Customer:

your explanation is very clear, thanks for your help!

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,689
Experience: Taxes, Immigration, Labor Relations
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