LLC taxed as S-Corporation - Tax Provisions

[Roberto Westerband]

If an LLC elects to be taxed as an S-Corporation, what are the specific tax provisions that would need to be included in the Operating Agreement in order for that tax status to hold in court down the road? Thanks

[Christopher Phillips]

LLCs can elect to file as C corps or S corps. You just have to file a document called in election with the IRS.

You can file form 2553 with the IRS to elect for S corp treatment. You can't have more than 100 shareholders. None of the shareholders can be non-resident aliens (non US citizens living outside the US). None of the other entities or shareholders can be other corporations or partnerships. An you can only have one class of stock.

You will be treated as a shareholder and an employee at the same time. You don't pay social security or medicare on money that stays within the LLC. You only pay taxes on the amount that pass thru to you as a salary. You do have to pay yourself a reasonable salary. If you don't file the S corp status, then you'll have to pay the employment tax.

Any flippers in your area that can recommend a better tax professional or lawyer?