The LLC must first be qualified to choose S Corp status. The LLC must be a domestic entity with only one owner, or “single-member,” and that owner must be an individual, estate, or specific trusts in order to be eligible. The LLC must also have no more than 100 stockholders, all of whom must be citizens or residents of the United States.
If the LLC satisfies these criteria, the owner may opt S Corp status by submitting Form 2553 to the IRS. It is crucial to remember that this form must be submitted within 75 days of the start of the tax year in which the election is to be effective or at any point in the tax year immediately before the tax year in which the election is to be effective.
The tax return cannot be filed along with Form 2553. The IRS must receive a separate filing of it. The owner may, nevertheless, submit Form 2553 by mail or electronically. The single-member owner must sign the paperwork. If the owner is unable to sign, the form may be signed by another person on the owner’s behalf.
What Constitutes a Good Reason for a Late 2553 Filing? The owner may still be able to file Form 2553 after the 75-day deadline if they can demonstrate a valid reason for the delay. Reasonable cause, according to the IRS, is “a circumstance beyond the taxpayer’s control that prevented the taxpayer from meeting the deadline, despite exercising ordinary care and prudence.”
A natural calamity, a catastrophic disease, or a professional error are a few examples of justifiable cause. However, the owner will not be able to choose a S Corp for that tax year if they miss the deadline without good reason.
In conclusion, if a single-member LLC satisfies the eligibility conditions, it may file as a S Corp by filing Form 2553 to the IRS. The form must be submitted by the deadline and cannot be submitted along with the tax return. If the owner misses the deadline, they could still be permitted to submit the form after it has been due if they have a good reason.