MARK KOHLERMain Street Professionals, Main Street Professionals, Main Street Professionals, Main Street Professionals, Main Street Professionals, LLC · Owner at Main Street Professionals, LLC

S-Corp or S Election? w Mat Sorensen #shorts

23 Feb 2022 · 1 min

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Mat Sorensen explains that the IRS treats an S Corporation and an LLC with S Corp election identically for taxes, both filing Form 1120S. Starting as an LLC and electing S Corp status later lets you delay payroll filings until you have enough income, and many states like Arizona charge lower fees for LLCs than corporations.

Chapters

What is the difference between an S Corp and an LLC being taxed as an S Corp? The difference to the IRS is there is no difference. The IRS looks at you the exact same. You file the exact same forms to the IRS, it's an 1120s tax return. You're going to be doing payroll to yourself and you're going to get a W2. So as far as the IRS is concerned, it is all the same. There's really two reasons why you may want to just do an LLC with an S Corp election rather than just go full S Corp out the gate. The first reason is you may not want the S Corp tax status too early on. You have to start doing payroll reporting. You got to start doing a quarterly payroll report and then once I've got good income coming through the llc, I can add the S election later. Second reason is some states like Arizona have lower fees and lower filing requirements for LLCs versus corporations. In Arizona, for example, I like to do LLC's taxes S Corp for clients here because there's no annual report to the state.