How a Single-Member LLC Can Be an S Corporation

A single-member LLC can be taxed as an S Corporation if it meets the IRS's eligibility criteria. 

Normally, a single-member LLC is taxed as a Sole Proprietorship, which means the owner and the business are considered the same tax-paying entity. The LLC's profits and losses pass through to the owner's personal income tax return. The LLC member gets paid through the owner's draws from the business's profits, typically a check from the company to the LLC member. 

When a single-member LLC is taxed as an S Corporation, profits and losses pass through to the owner's personal income tax return. However, there is a difference that may reduce the LLC owner's personal tax liability. As an S Corporation, the LLC must put the owner on its payroll. 

How to Elect S Corporation Status for Single-Member LLCs 

S Corporation election requires filing IRS Form 2253, Election by a Small Business Corporation. If an LLC wishes for the S Corporation election to be effective the following tax year, it can file Form 2553 anytime during the preceding year. If the LLC wants its S Corporation status effective in the current tax year, it must move more quickly. 

• Form 2553 Filing Deadline for Existing LLCs:
  If an existing LLC wants its S Corporation election to be effective in the current tax year, it must file Form 2553 within two months and 15 days after the beginning of the LLC's tax year. 

• Form 2553 Filing Deadline for New LLCs:
  A new LLC must file Form 2553 to elect S Corporation status within two months and 15 days (75 days) after the entity's date of formation. 

How to File Single-Member LLC Taxes 

Under default taxation as a Sole Proprietorship, most single-member LLCs report their business profit or loss on Schedule C when filing their Form 1040 (U.S. Individual Income Tax Return). 

For an S Corporation, tax preparation is a little more complicated.

This document is designed for general information only. The information presented in this document should not be construed to be formal legal or tax advice nor the formation of a lawyer/client relationship. 

For more information on this and other topics, please contact Kevin via any of the channels listed below:

📧 kevin@kmckernan.com  | 📞 718-317-5007