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The landscaper
02-09-2005, 11:40 PM
I was talking with my legal studies prof today. He was telling me that as a LLC you could be taxed as partnership or C-corp if you wanted. He was saying that you could not use the S-Corp. I could have sworn some of you were telling me that is how you have your companies setup. Whos gone wrong here?

Turf Medic
02-09-2005, 11:50 PM
It is my understanding that a s-corp is taxed the same as a sole proprieter. All of the income flows through to the owner(s). With the LLC you can choose how to handle the income. You can hold some of the revenue like a c-corporation or you can allow the income to flow through to the owner(s). At least that is how the paperwork read when we set up our LLC.

tonygreek
02-09-2005, 11:50 PM
your prof is wrong (don't you love the sound of that?). i think it's irs form 2553 that takes care of the election.

The landscaper
02-09-2005, 11:58 PM
Purpose
To elect to be an S corporation, a corporation must file Form 2553. The election permits the income of the S corporation to be taxed to the shareholders of the corporation rather than to the corporation itself, except as noted below under Taxes an S Corporation May Owe.

Who May Elect
A corporation may elect to be an S corporation only if it meets all of the following tests:

It is a domestic corporation.

Note:
A limited liability company (LLC) must file Form 8832, Entity Classification Election, to elect to be treated as an association taxable as a corporation in order to elect to be an S corporation.



Is that what this is saying?

lsylvain
02-22-2005, 05:01 PM
LLC can be taxed either as Corp. Partnership, or Sole Prop. Depends on the situation. An LLC is a liability issue not a tax issue. I believe what your prof. was saying is that you cannot be an LLC and be taxed as an S-Corp.

tonygreek
02-23-2005, 12:28 PM
an llc CAN be taxed as an s-corp. if not, someone might want to notify the cpas of those of us who are set up in this manner.

plateau lawn care
02-24-2005, 04:15 PM
Just incorporate as an s-corp. You can get it done here in ga for less than 1,000 $ or you can go through the steps yourself for free

lsylvain
02-25-2005, 03:34 PM
No, an LLC is not taxed as an S-Corp an S-Corp is and S-Corp. If you are an LLC you can elect to be taxed as a corporation then as a Corporation you can elect to become an S-Corp, then you are an S-Corp not an LLC.

An LLC is a state designation not a federal one. LLC doesn't "exist" at the federal level or in several states.

My question is, Why do you want to be an LLC and and S-Corp at the same time? Just pick one.

tonygreek
02-25-2005, 04:47 PM
No, an LLC is not taxed as an S-Corp an S-Corp is and S-Corp. If you are an LLC you can elect to be taxed as a corporation then as a Corporation you can elect to become an S-Corp, then you are an S-Corp not an LLC.

seemingly by this logic, if you're an llc taxed as an sp, you're just a sole proprietorship, or partnership, or c-corp, or s-corp, so why not just form one of those? you said an llc can't be taxed as an s-corp. as you've since pointed out, it can, through a simple 2 step process.

An LLC is a state designation not a federal one. LLC doesn't "exist" at the federal level or in several states.
correct. it's disregarded in their eyes. i think we all know this, so is this a semantical or metaphysical discussion? :rolleyes:

My question is, Why do you want to be an LLC and and S-Corp at the same time? Just pick one
for this very reason, specific questions people ask on here about how they should structure their company are ridiculous. the complexities of each are not addressable for each specific application. any accountant will tell you that this is complicated set-up. for my company, it's a profit growth issue. i was an llc taxed as an sp. the reality of business growth, and the simple process of altering the tax structure were what best suited me. if you're familiar with s-corp distributions, as i assume you are, you understand. operating cash roll-over from tax year to tax year is another issue. another reason is the annual corporate paperwork that is not required when you go through the backdoor.

i'm not an accountant, but my accountant is... :) if this option wasn't available while you were in school (i think it's fairly new), you might try searching the web for the strategic reasons or ring your favorite cpa up as i really have nothing else that think i can add.

lsylvain
02-25-2005, 05:32 PM
The point is you can be an SP and become a S-Corp you can be a partnerhip and become a S-Corp you can be a corporation and become a S-Corp and you can be an LLC and beocome a S-Corp. What you cannot do is be a SP and a Corporation at the same time or a Partnership and SP at the same time. You cannot be a S-Corp and LLC at the same time you are one or the other.

You can be an LLC TAXED as an SP, or TAXED as a Partnership, or TAXED as a Corporation. If you are an LLC you can BECOME a S-Corp by first filing to be TAXED as a corporation then filing to BECOME a S-Corp.

The main point I guess I am trying to make is that LLC has absolutly nothing to do with Income Taxes. Hence why you have to elect (or the IRS does it for you) to be taxed as one of the three business entities.

I am an Accountant and I graduated #1 in my class in Accounting and business. You accountant most likely is interpreting the tax code and not taking it for what is says. Again it really doesn't matter because the llc doesn't "exist." pharaphrasing:

"An LLC must elect to be taxed as a corporation to become an S-Corp." It does not say to be taxed as an S-Corp is says to become and S-Corp. That is as different as someone being treated like a women and actually becoming a women.

The landscaper
02-25-2005, 07:48 PM
I want the LLC for the liability issues and the cheaper start up costs than that of the s corp, but i dont want to pay self employment tax like sole prop or partnership so i want the s corp taxation.

Critical Care
02-27-2005, 07:28 PM
If you become an S Corp, then you'll have employees, and employees receive wages. With employees you will have workmans comp insurance, and such things as social security and medicare coming out of earnings. I'm not so sure that it's the cheaper way to go because of these factors. As a sole proprietorship, your self employement tax would be pending upon a net gain, but would be absent if you don't show one - which can happen with large startup costs.

The landscaper
02-28-2005, 10:20 AM
I could set up as a LLC taxed like a s corp and not have employees. right?

Critical Care
02-28-2005, 02:58 PM
If you're going to be doing any work, earning money, then I can't see how you can have a corporation without any employees. Below is an example of what happened to an accountant that tried to get by as an S Corp while not claiming himself as an employee.

"The Tax Court held in Joseph M. Grey Public Accountant, P.C., 119 TC No. 5 (2002), that an accountant who was the president of his wholly owned S corporation was also its employee for employment tax purposes. The S corporation was thus liable for FICA and FUTA taxes under Secs. 3121(d)(1) and 33060)..."

Fvstringpicker
02-28-2005, 08:39 PM
What seems to be missing in this entire discussion is why does an individual with a LLC want to be taxed as an s-corp.



People who look for easy money invariably pay for the priviledge of proving that it cannot be found on this earth.
---Jesse Livermore

The landscaper
02-28-2005, 09:08 PM
I had just asked a question about getting around the self employment tax.

tonygreek
02-28-2005, 10:43 PM
fvstring, i addressed that in this thread. i'll the first to say that it's not for everyone.

seriously guys, talk to an accountant for these questions as everyone's different and it would be waaaay too time consuming to actually lay out the details on these boards.