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Terminating Your S Corporation Election

1/2/2019

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We have been stressing that the winners with the new Tax Law are C- Corps, however the next best thing are S-Corps.  If you feel you can comply with all the laws of a C-Corp you may want to look into terminating your S Corp Election.
Tax reform may have you thinking of changing your S corporation to a C corporation, partnership, or sole proprietorship. 

With such a switch, you need to consider:
  • How do I terminate the S corporation election correctly?
  • What are the tax consequences to me? 

If you want to turn your S corporation into a C corporation, you file an S corporation election revocation statement with the IRS. Your corporation is then a C corporation for federal tax purposes.

If you don’t want your business to be either an S or a C corporation, you liquidate the S corporation and contribute the assets to a new business entity.

If you chose S corporation taxation for your limited liability company (LLC), changing that election is a little more complicated.

First, you must file the S corporation election revocation statement with the IRS. The tax law then treats your LLC as a C corporation for federal tax purposes.

If that’s what you want, stop there.
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If you want a disregarded entity (single-member LLC) or a partnership (multi-member LLC), you also need to file Form 8832, Entity Classification Election, to revoke the C corporation election.


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    Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.

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    To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
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    These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

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    Author

    Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion.  Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.

    Keana founded this website and decided and created this blog page to offer a space for those seeking knowledge to understand, however not to be confused with advice or planning strategies.

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