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

[Alicia Yoder]

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!

[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 S status.