Due to its adaptability, limited liability protection, and pass-through taxation, limited liability companies, or LLCs, are a common corporate form. However, LLCs do not have the same tax advantages as S Corporations and are not subject to the same tax laws. On the other hand, S Corporations provide pass-through taxation but with constrained liability protection. So, can a 95-member LLC choose to become a S Corp? The answer is yes, however you must also submit forms 8832 and 2553. How Come I Need Form 8832?
The Entity Classification Election form, or Form 8832, is used to choose how an LLC will be taxed. If an LLC wants to opt to be taxed as a S Corporation and has 95 members, they must submit Form 8832. Within 75 days of the election’s start date, the form must be submitted. If Form 8832 is not submitted, the default tax classification, based on the number of members, will be either a disregarded entity or a partnership.
A sole proprietorship cannot submit Form 2553, sorry. The S Corporation status, which does not apply to sole proprietors, is elected using Form 2553. A sole proprietor cannot choose to be taxed as a corporation; instead, they are subject to individual income taxes.
For qualifying companies, such as LLCs with 100 members or fewer, Form 2553 is used to elect S Corporation status. The income, deductions, and credits from an LLC that elects to be taxed as a S Corporation pass through to the tax returns of the individual members, making the LLC a pass-through entity. S Corporations are also exempt from federal income tax; however, individual taxpayers are still responsible for paying taxes on the revenue.
A corporation may choose to alter its accounting period by making a Section 444 election. S Corporations that have been in operation for at least three years and have not changed their accounting period in the previous three years are eligible to make this election. By making this choice, the organization is able to adjust its accounting period to coincide with the calendar year.
Finally, by submitting Forms 8832 and 2553, an LLC with 95 members may decide to be taxed as a S Corporation. Additionally, S Corporations have the option to change their accounting period through a Section 444 election, while sole proprietors are not permitted to file Form 2553. Businesses may make educated selections and maximize their tax benefits by comprehending these tax elections and their conditions.
Consequently, the response to the query “Is ESBT income subject to NIIT?”?” cannot be determined based on the given article title “Can an LLC with 95 Members Elect to be an S Corp?” as it is not directly related to the topic of the article. It is best to refer to a separate source of information or consult a tax professional for a specific answer to this question.
Both an ESBT and a QSST are trusts that are utilized for tax purposes. The fundamental distinction between the two is that an ESBT (Electing Small Business Trust) can hold S corporation stock for numerous beneficiaries as well as other types of assets, but a QSST (Qualified Subchapter S Trust) is used to hold S corporation stock for a single beneficiary.