Building Your Business Becoming an Owner Business Types How to Change Your LLC Tax Status to a Corporation or S Corporation Forms to Use for LLC Electing To Be Taxed as a Corporation or S Corp By Jean Murray Jean Murray Facebook Twitter Jean Murray, MBA, Ph.D., is an experienced business writer and teacher who has been writing for The Balance on U.S. business law and taxes since 2008. She has taught accounting, business law, and business finance at business and professional schools for over 35 years, has authored several books on saving money and simplifying your business, and was the owner of startup-focused company Emence Enterprises, LLC. learn about our editorial policies Updated on September 15, 2022 Fact checked by Sarah Fisher Fact checked by Sarah Fisher Sarah Fisher is an associate editor at The Balance with two years of personal finance and business writing experience. She has written about personal finance for SmartAsset, and has held internships at the Consumer Financial Protection Bureau and Senator Kirsten Gillibrand's office. learn about our editorial policies Share Tweet Pin Email In This Article View All In This Article How an LLC Is Usually Taxed Electing C Corporation vs S Corporation Status LLC Electing to be Taxed as a Corporation Electing S Corporation Tax Status Form 2553 for Election to Be Taxed as an S Corp Timing Your Tax Election Frequently Asked Questions How do I change my tax status to an S-Corp? Is a single-member LLC an S-Corp or C Corp? Photo: The Balance / Maddy Price Your financial advisor or tax professional may have told you of the potential benefits if you decide to have your LLC file an election to be taxed as either a corporation or an S corporation. If you change the LLC's tax status to a corporation or to an S corporation, the legal status of the LLC remains the same. In other words, you still function as an LLC in every way except in how you pay taxes. Key Takeaways An LLC can be taxed as a sole proprietor or as a partnershipAn LLC can elect to be taxed as an S corporation or as a C corporationYou'll need to file IRS Form 8832 to have your LLC taxed as a C corporationYou'll need to file IRS Form 2553 to have your LLC taxed as an S corporation How an LLC Is Usually Taxed A limited liability company (LLC) is not recognized by the IRS as a taxable entity. So an LLC pays income taxes based on how many members (owners) the business has: A single-member LLC pays income tax as a sole proprietorship, through the member's personal tax return. A multiple-member LLC pays income taxes as a partnership. Note Both single-member and multiple-member LLCs may elect to be treated as a corporation or S corporation for income tax purposes. Electing C Corporation vs S Corporation Status The process of changing the tax status of an LLC to a corporation or S corporation is called an election. The two processes are different: To elect classification as a C corporation, the LLC must file IRS Form 8832 - Entity Classification Election. To elect classification as an S corporation, the LLC must file IRS Form 2553 - Election by a Small Business Corporation. Note An S corporation is a type of corporation, not a separate type of business. A business that is already a corporation files Form 2553 to elect to be an S corporation. LLC Electing to be Taxed as a Corporation Filing Form 8832 If you want your LLC to be taxed as a corporation, you must file Form 8832. Here are some things you need to know about this election: The form allows "eligible entities" to file this election, and LLCs are by eligible entities by definition. The form includes a consent statement which may be signed by all of the LLC members, or by one member on behalf of all members. If one member signs, there must be some record in company membership meetings that all members approved this election. You must provide the name(s) and identifying number(s) of owners (Social Security Number for a single-member LLC, and Employer ID for multiple member LLC). The form directs you through a series of decisions and questions to a filing. The first section helps you to determine the eligibility of your business to apply for this change. The second section asks you to select your current entity type and the type you are selecting. (The terms "domestic" and "foreign" in this section have to do with the state where the business is registered.) The last section includes a consent statement and requires signatures. Single-Owner LLCs and Form 8832 If your LLC has only one member (a single-member LLC), the options noted on the form are to be classified as an association or be disregarded as a separate entity. An LLC with only one owner can be classified as a disregarded entity. This designation means the LLC is not separate from the owner for income tax purposes (filing business income taxes on Schedule C as part of the owner's personal tax return). There is nothing you need to do to have this classification. If you check "No" in Box 3 because you don't have more than one owner, you will need to give the owner's name and identifying number. Then in Part I, Box 6, you would check Box C "A domestic eligible entity with a single owner electing to be disregarded as a separate entity" or Box F "A foreign eligible entity electing to be disregarded as a separate entity." Electing S Corporation Tax Status In the same way that a corporation can elect to be taxed as a corporation, an LLC may elect to be taxed as an S corporation by filing IRS Form 2553 with the IRS. The election must be made no more than two months and 15 days after the beginning of the tax year when the election is to go into effect. This article on how a corporation elects S corporation status will give you more details. Why Elect S Corporation Status The other tax option for your LLC is to elect to be taxed as an S corporation. Your LLC will need to meet the eligibility requirements of S corporation status. Both the LLC and S corporation are pass-through entities, meaning that the income of the business passes through to the owners. S corporation status has two benefits: It allows the business to avoid the double taxation issue of corporations. Double taxation is taxing the corporation on its income and taxing the shareholders on dividends. S corporation officers who work in the business are considered employees. They are not considered self-employed and they don't pay self-employment taxes on the income they earn as S corporation officers. They must be paid a "reasonable salary" and pay income taxes on this income. Note If you want your LLC to be taxed as an S corporation, you just need to file Form 2553. You don't need to elect to be taxed as a corporation first. Form 2553 for Election to Be Taxed as an S Corp Form 2553 is similar to Form 8832 above, with some differences. The election begins on a specific tax year and you must select the type of tax year, including fiscal year (financial year). Form 2553 discusses shareholders, but your LLC probably doesn't have shareholders. In this case, you should enter the percentage of ownership and date(s) acquired. A single-owner LLC would have 100% of the ownership. As with Form 8832, you must list all shareholders with their percentage of ownership, and taxpayer ID. All shareholders/owners must consent to the election. Timing Your Tax Election Before you decide to have your LLC elect corporation or S corporation status, make sure you are eligible to make this election. You must make the election at a specific time, relating to the tax year it will become effective. These details are also included in the Instructions. Form 8832. You must designate an election effective date. The election can't take effect more than 75 days before the date the election is filed, nor can it take effect later than 12 months after the date of filing. (There is also a late election relief.) For example, if you file the election on January 1, 2021, the election must take effect no earlier than October 18, 2020, and no later than December 31, 2021. Form 2553. You must designate a tax year beginning with a specific month, day, and year. You must complete and file this form: No more than two months and 15 days after the beginning of the tax year the election is to take effect, orAt any time during the tax year before the tax year it is to take effect. For example, if you designate January 1, 2021, as the beginning of your tax year, you must file the election in 2020, but no than March 15, 2021. Frequently Asked Questions How do I change my tax status to an S-Corp? An LLC can change its tax status and elect to be taxed as an S corporation. You'll need to file IRS Form 2553 with the IRS. The LLC must elect to be taxed as an S corporation no more than two months and 15 days after the beginning of the tax year when the election is to go into effect. Is a single-member LLC an S-Corp or C Corp? A single-member LLC can be taxed as a disregarded entity. The owner of a single-member LLC can also elect to have the LLC taxed as either an S corporation or a C corporation. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. IRS. "Limited Liability Company (LLC)." IRS. "Publication 3402 Taxation of Limited Liability Companies." Page 3. IRS. "Form 8832 Entity Classification Election." Cornell Legal Information Institute. "Double Taxation." IRS. "Fact Sheet FS 2008-25 Wage Compensation for S Corporation Officers." IRS. "Form 2553 Election by a Small Business Corporation." IRS. "Instructions for Form 2553." Page 1.