Watch Out! Common Pitfalls with LLCs Taxed as S Corporations

A limited liability company (LLC) can be taxed as an S corporation, but an S corporation is not always a good choice. Learn the tax options available to LLCs and the advantages and disadvantages of electing to be taxed as an S corporation. When evaluating the procedures for eligibility, use this checklist to focus on the definition of small business corporations, eligible entities, ineligible entities, terminations, late election relief, and Form 2553, Election by a Small Business Corporation.

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• Eligibility Requirements for S Corporations
  Learn more about S corporations, which are regular corporations with between one and 100 shareholders. They pass through their net income or losses to their shareholders. Therefore, the corporation itself is not subject to U.S. federal income tax, and files an informational return. When you consult a client who desires to elect S corporation status, you must advise carefully of the eligibility criteria.

• Partnership and Other Pass-through Entities Taxation Resource Kit
  Learn more about the taxation of pass-through business entities such as partnerships, LLCs, and S corporations. Before beginning business as a pass-through entity, you will want to start with a review of the advantages and disadvantages. Once you have decided that a pass-through entity is the best entity choice you will need to take steps to form the entity. 

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