Elected to be S Corp and now don’t want it

6 Replies

Hey guys,

I have a dog walking company and was improperly told to elect S Corp status. I don’t make enough in the company for that to be advantageous so I would like to cancel it but not dissolve the company completely. How can I do that? Do I just file a 1020s and mark final return?

Thanks in advance!

We hear about this kind of thing all the time. Individuals or even firms that advise s-corp elections where the tax savings don't justify the election. 

You can actually write to the IRS requesting revocation of the S-corp and requesting to be taxed as a disregarded entity. The letter has to contain some specific info so you may want to check around the IRS website or work with a tax professional to walk you through it. 

@Alicia Yoder, after the S election is revoked, the corporation becomes a “regular” or “Subchapter C” corporation. It does not become a disregarded entity. 

If your LLC elected to be S-corp, when the revocation becomes effective, the LLC will be treated as a C corporation unless it files Form 8832 (Entity Classification Election) to be taxed as a partnership or disregarded entity. Note, however, that this likely results in a taxable liquidation of the corporation

Generally, you cannot reelect S status for at least five years following the revocation, although the IRS may approve an earlier reelection in certain circumstances. Such approval may be given, for example, if the corporation has new shareholders or if the corporation never enjoyed the benefits of S status.

Originally posted by @Daniel Hyman :

We hear about this kind of thing all the time. Individuals or even firms that advise s-corp elections where the tax savings don't justify the election. 

You can actually write to the IRS requesting revocation of the S-corp and requesting to be taxed as a disregarded entity. The letter has to contain some specific info so you may want to check around the IRS website or work with a tax professional to walk you through it. 

That is incorrect it becomes an S-corp. You have to go through the dissolution process. . Unless you properly file to disregard the original election timely. There is a very specific set of criteria to do this. If you do it incorrectly you will end up with a C-corp.

Originally posted by @Ashish Acharya :

@Alicia Yoder , after the S election is revoked, the corporation becomes a “regular” or “Subchapter C” corporation. It does not become a disregarded entity. 

If your LLC elected to be S-corp, when the revocation becomes effective, the LLC will be treated as a C corporation unless it files Form 8832 (Entity Classification Election) to be taxed as a partnership or disregarded entity. Note, however, that this likely results in a taxable liquidation of the corporation

Generally, you cannot reelect S status for at least five years following the revocation, although the IRS may approve an earlier reelection in certain circumstances. Such approval may be given, for example, if the corporation has new shareholders or if the corporation never enjoyed the benefits of


Even if they filed the 8832 they still have to process as a formal dissolution of the corporation.