You could be thinking about making a S corporation (S corp) election if you run a business and have formed a limited liability company (LLC). An S corporation is a specific kind of corporation that enables the transfer of earnings, credits, and deductions to owners for inclusion on their individual tax returns. The business owner may receive substantial tax benefits as a result. Here is a step-by-step tutorial on choosing an LLC to be a S corporation.
You must first create a Limited Liability Company before you can choose to have it operate as a S corporation. You can do this by submitting articles of incorporation to the secretary of state in the state where your business was founded. The filing fee for articles of organization in Illinois is $150.
Obtaining an Employer Identification Number is step two. The Internal Revenue Service (IRS) issues an Employer Identification Number (EIN), a special nine-digit number, to identify your company for tax purposes. To make a S corp election and submit taxes for your LLC, you must have an EIN. The IRS website offers an online EIN application process.
You must submit Form 2553 to the IRS if you want to elect your LLC to be a S corp. No later than 75 days after the formation of the LLC or within 75 days of the start of the tax year in which the election is to be effective, this form must be submitted. The filing of Form 2553 is free in the state of Illinois.
Your LLC must meet specific conditions, such as having no more than 100 shareholders, just one class of stock, and stockholders who are U.S. citizens or legal residents, in order to be eligible for S corp status. It’s crucial to seek advice from a tax expert to make sure your LLC satisfies these requirements. Does Illinois Require That I Register My Business?
You must register with the Secretary of State if you intend to run your business in Illinois. By submitting an application for a Certificate of Authority, you can accomplish this. You must register as a foreign LLC if your company is headquartered outside of Illinois yet you intend to conduct business there. Is a business license required by the State of Illinois?
There is no universal state business license in Illinois. However, a lot of Illinois cities and counties demand that companies obtain a regional business license or permit. It is crucial to check with your local authorities to see if your company needs a license or permit. How Do I Make Myself Pay From My LLC? You have a variety of options for how to pay yourself as the owner of an LLC, including taking a salary, a draw, or a distribution. To choose the best method of paying yourself from your LLC and to make sure you are in compliance with tax rules, it is crucial to speak with a tax expert.
Although an LLC has several advantages, including restricted liability and pass-through taxation, there are also certain drawbacks to take into account. For instance, an LLC’s members might only be able to raise a certain amount of money and it might be liable to self-employment taxes. Additionally, because it may dissolve upon the death or departure of a member, an LLC may have a shorter lifespan than a corporation. Before making a choice, it’s crucial to consider the benefits and drawbacks of creating an LLC.
A single-member LLC and a S Corporation are taxed very differently from one another. A single-member LLC is a pass-through entity, meaning that the business’s gains and losses are transferred to the owner’s individual tax return. The profits and losses of a S Corporation, on the other hand, are dispersed to the shareholders as dividends, which are then taxed at the individual level. An S Corporation is a pass-through organization as well, but it is taxed separately. Additionally, S Corporations are subject to certain restrictions on the number and kind of shareholders, as well as more stringent ownership requirements.
The cost to register a corporation in Illinois is not mentioned in the article “Election of LLC to S Corp: A Step-by-Step Guide”. However, the filing fee for incorporating a firm in Illinois is currently $150, according to the website of the Illinois Secretary of State. Depending on the kind of corporation being founded and the services provided, additional costs can be applicable. It is advised to get advice from a legal or financial expert for more detailed and current information.