1. Can an LLC File as a C-Corp?
2. Corporate Taxes for LLCs
3. Making the Election 
4. Electing C-Corporation Tax Treatment for a Single-Member LLC

Can an LLC File as a C-Corp?

If you have previously formed a limited liability company, also known as an LLC, you will not be considered a C-Corp unless you take the appropriate course of action. In this case, you would need to form a legal corporate entity. With that being said, if you would like your LLC to be a C-Corp for taxation purposes, the IRS approves of this transition. However, in doing so, the LLC must comply with all associated corporate tax rules for a certain amount of years.

Although you can certainly apply to be taxed as a corporation instead of a partnership or sole proprietorship, many tax advisors view an LLC as an ideal business structure. This leads to the question, why would you want to be taxed as a corporation? 

Corporate Taxes for LLCs

If you are currently an LLC and file your taxes as a C-Corp, you will be responsible for double taxation. This is represented by:

  • The LLC needing to pay taxes itself, based on all profits made. 
  • Then, a second tax will occur at the owner or "member" level. 

In comparison, when a company is taxed as an LLC, it is subject to partnership or sole proprietorship taxation. In this case:

  • If an LLC is owned by one member only, you would need to file Schedule C on your individual tax return.
  • If an LLC has multiple members, Form 1065 will need to be filed, along with Schedule K-1s for each individual member.

Making the Election 

If C-Corp tax treatment is ideal for your business, you can seek C-Corp election for tax purposes. This will require you to file Form 8832 with the IRS. Please note, the earliest you can be considered a C-Corp for taxation purposes is 75 days prior to the filing of Form 8832.

Once elected, the LLC will need to pay corporate taxes for a minimum of five years. Only after five years can the LLC file for a new election.

When filing, an LLC will become an "association" — meaning the company is an eligible entity that will be taxed as a corporation. Within the consent statement, all members can sign or a single member can sign on everyone's behalf. If one member only signs, there should be some record that all members agreed during a company membership meeting. 

You must also include:

  • The name(s) and associated number(s) of all company owners.
  • If a single-member LLC, a social security number will be included.
  • If a multi-member LLC, an Employer Identification Number (EIN) will be included.

Electing C-Corporation Tax Treatment for a Single-Member LLC

A corporation means that it is a separate entity from all employees and owners. This means that the corporation itself must pay taxes on the company's net income. This process differs from the steps you would take when filing your individual tax return. 

For example, as a single-member LLC that is classified as a corporation, you will not be treated as self-employed. The IRS does not assume that you received all of your company's profits. In contrast, you can receive whatever amount of money you choose from your LLC in a given year. On your personal taxes, you will only be taxed on that amount. 

For example, if the LLC made $75,000 gross and you personally took $15,000, you would report income of $15,000 on your personal tax return. The most common means of payment would be as salary or as a dividend. It is important to note that a dividend is not deductible. This means that both your single-member LLC and you (payable on your individual tax return) will have to pay taxes on all dividends. This is known as double taxation.

However, if you decide to pay yourself a salary, these payments are considered to be tax deductible. If you do opt for this route, however, know that you must follow employer tax rules. You will be required to withhold taxes and pay that amount to the federal government. It is highly recommended that you place all applicable taxes in a separate account. 

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