Kiritsis & Associates


5 Tax Benefits for LLCs Electing S Corp Status. . --  Kiritsis Law Firm Group 212 922 0005

Apr 27, 2021

LLCs electing S Corps status have to go through a regulatory minefield, but if successful, a number of tax benefits can be in the horizon.

1. Lower self-employment taxes. Although, LLCs are thought of being scalable, meaning they are designed to change and adapt to the needs of a growing business, one of the areas, where an S Corp may provide more fertile ground for self-employment taxes.

2. Separate tax return. The LLC, especially a single member LLC taxed as disregarded entity  wants to benefit from separate tax reporting filings, such as Form 1120S, but does not want (at least yet), elect C Corp tax treatment which file Form 1120.

3. Reduce tax audit risk. Generally, if properly structured and accurately reported, an S Corp could potentially be significantly less likely to be subjected to a tax audit.

4. Work around certain bankruptcy-related tax issues. Getting bankruptcy relief often requires a business to file past unfiled tax returns. It may be easier to basically, reverse engineer, and recreate certain bookkeeping reports by having the business be an S Corp rather than LLC, in certain situations.

5. Resolve certain divorce-related tax issues. In many divorce situations, such as,  the two spouses still want to operate a business together, but want a lot of formalities, so that it does not create a further adversely and business dispute among the parties.


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