Subchapter S Corporations

If you have a business that generates a big profit over and above what you would consider reasonable compensation for the services that the owners provide, you may be unnecessarily subjecting the profits to self-employment taxes if you are operating as an LLC taxed as a partnership. If you think your business may fit this description, your LLC may benefit from choosing to be treated as an S corporation under the tax laws. To have your LLC receive the tax treatment of an S Corp, you must file an election with the IRS using Form 2553. You must file Form 2553 within the first two months and fifteen days of the beginning of the tax year in which the election is to take effect. There are drawbacks, however, so no decision should be made without discussing your own situation with a qualified professional.