They can make an election to be taxed as an S corporation. Once formed, the owners have a choice as to how they would like the entity taxed for purposes of Federal income tax. About S CorporationsĪn LLC is an entity formed under state law. The LLC then adopted a new company agreement and filed a request with the IRS to be treated as an S corporation. Income Tax Return for an S Corporation, for its first several years of operation.Īt some point, the LLC realized that the partnership language in its company agreement terminated its S corporation election. The LLC made an election to be taxed as an S corporation. This language included an allocation of profits with an allocation to eliminate negative capital accounts and a liquidation term that allocated the proceeds according to the capital accounts. The LLC’s company agreement included standard partnership tax allocation language. The taxpayer is a limited liability company (“LLC”). 5 Planning for the S Corporation Election.3 One Class of Stock and Partnership Allocations.
