Question about LLC to be taxed as S-corp


J

John Bliss

I have a single member LLC which for federal tax purposes is disregarded entity. I recently talked to my accountant about requesting that the LLC be treated as S-Corp (form 8832). However he suggested winding up the LLC and starting fresh with an S-Corp. The reason he cited was there was issue with CA having a corporation number as 7 characters long and the federal id being 12 characters.

Can someone shed some light on this issue and whether there is a solution without starting a fresh s-corp?

Thanks
 
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S

Stuart A. Bronstein

John Bliss said:
I have a single member LLC which for federal tax purposes is
disregarded entity. I recently talked to my accountant about
requesting that the LLC be treated as S-Corp (form 8832).
Why would you want to do that? I would normally think that an LLC
taxed as a pass-through would be either the same or better than the
taxation of an S-corporation.
However he suggested winding up the LLC and starting fresh with
an S-Corp. The reason he cited was there was issue with CA
having a corporation number as 7 characters long and the federal
id being 12 characters.
Would your accountant be the one to set up the new corporation, along
with a significant charge for that service?
 
P

Pico Rico

John Bliss said:
I have a single member LLC which for federal tax purposes is disregarded
entity. I recently talked to my accountant about requesting that the LLC be
treated as S-Corp (form 8832). However he suggested winding up the LLC and
starting fresh with an S-Corp. The reason he cited was there was issue with
CA having a corporation number as 7 characters long and the federal id
being 12 characters.

Can someone shed some light on this issue and whether there is a solution
without starting a fresh s-corp?
Did he state what the "issue" was? sounds bogus to me. The CA LLC return
(form 568) has fields for BOTH the CA SOS number and the FEIN, so what would
be the confusion?
 
L

lotax

Your accountant is balking at the notion that the ID numbers for federal and state purpose have **different numbers of characters**???

C'mon, John, read the signs: Sounds like your accountant might not have done his homework and studied the elections available to LLCs, especially the one whereby an LLC chooses to be taxed as if it were a corporation, and *also* - right there on the very same form (and, FYI, it's *not* Form 8832) - elects to be taxed as an S corporation. And he's worried that he won't be able to bill you for the time it's going to take him to get up to speed on the choices that LLCs can make about how they're taxed.

Okay, it's not really as simple as it sounds, overall, but the "dual" election is made on Form 2553, and it's due by March 15th of the current year. You might want to read up on the requirements to be eligible to be an S corporation to be sure your LLC toes the line in that respect.

And there are only nine digits in the federal ID number, not twelve, where I come from. Dunno 'bout California: everything is different back there.
 
R

remove ps

Stuart said:
Why would you want to do that? I would normally think that an LLC
taxed as a pass-through would be either the same or better than the
taxation of an S-corporation.


Would your accountant be the one to set up the new corporation, along
with a significant charge for that service?
An S Corp pays no $800 minimum tax in its first year of existence.
 
L

lotax

Thank you, Stuart! When I was last in California, Reagan was still in movies.
 
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L

lotax

Does that LLC stealth tax have something to do with the number of digits in the state identification number?
 
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S

Stuart A. Bronstein

lotax said:
Does that LLC stealth tax have something to do with the number
of digits in the state identification number?
If you are talking about the California $800 minimum tax, that
applies to all corporations, LLC's and limited partnerships.

But for LLC's there's a special addition gross receipts tax when
gross income exceeds $250,000.
 

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