July 1, 2025
The default tax classification for an SMLLC is that of a "disregarded entity," where all net income is reported on the owner's personal tax return and is subject to self-employment taxes. An election to be taxed as an S corporation can offer significant tax savings by allowing profits to be split between a "reasonable salary," which is subject to payroll taxes, and "distributions," which are not.
The standard deadline for making this election is strict. However, the IRS provides a pathway for relief for late elections under Revenue Procedure 2013-30. This procedure allows an eligible entity to file for retroactive S corporation status up to three years and 75 days after the intended effective date, provided certain conditions are met. These conditions include having a "reasonable cause" for the late filing and demonstrating that the failure to elect was the sole defect.
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