S Corp Election for a Wyoming LLC or Corporation

Who can elect S corporation status

A Wyoming corporation, or an LLC eligible to elect to be treated as a corporation, can file IRS Form 2553 to be taxed as an S corporation if it meets the federal eligibility rules. Wyoming does not have a separate state election form for this; the election is federal.

The election changes how income is reported and how owners who work in the business are paid. Talk with your accountant before electing, because the right answer depends on profit levels and payroll.

Source: www.irs.gov

The deadline that matters

Form 2553 must be filed no more than 2 months and 15 days after the beginning of the tax year the election is to take effect, or at any time during the tax year before. For a new company, the 2-month period starts on the day it begins its first tax year. The IRS has relief procedures for late elections, but it is easier to file on time.

Form the Wyoming entity first, then get the EIN, then file the election. Each step depends on the one before.

Source: www.irs.gov

Eligibility in short

Under the Form 2553 instructions, an S corporation must be a domestic corporation (or an entity eligible to be treated as one), have no more than 100 shareholders, have only allowable shareholders (individuals, estates, certain trusts and certain exempt organizations), have no nonresident alien shareholders, and have only one class of stock. A Wyoming LLC or corporation can meet these rules, but a company owned by another company or by a nonresident alien generally cannot.

The shareholders must consent to the election on the form, as the instructions describe.

Source: www.irs.gov

LLCs electing S status

An eligible LLC that files a timely Form 2553 is treated as having elected to be classified as an association taxable as a corporation, so it generally does not also need to file Form 8832. The LLC remains a Wyoming LLC for state law purposes: same operating agreement, same annual report, same $60 minimum license tax.

If the election is late, the instructions describe relief for late elections when the company can show reasonable cause. Ask your accountant whether you qualify before you file.

Source: www.irs.gov

Order of operations

1. Form the Wyoming company and wait for the filed articles. 2. Get the EIN. 3. Confirm eligibility and timing with your accountant. 4. Collect every shareholder's consent. 5. File Form 2553 within 2 months and 15 days of the start of the tax year you want it to take effect. 6. Keep the IRS acceptance letter with your company records.

Source: www.irs.gov

Where we fit in

We form the Wyoming company and get the EIN ($99). The S election itself is a tax decision, so your accountant should confirm eligibility and timing and file or review Form 2553 with you.

Source: www.irs.gov

What changes in Wyoming and what does not

Nothing about the Wyoming filing changes when the IRS accepts an S election. The company keeps the same name, filing ID, registered agent and anniversary month. The annual report still reports the company's Wyoming assets, and the license tax is still $60 or $0.0002 of those assets, whichever is greater. What changes is federal: how income is reported and how owners who work in the business are paid.

If you later revoke the election or the company stops qualifying, the Wyoming record is again unaffected. Keep the IRS letters in the company binder so the tax history is easy to follow.

Source: sos.wyo.gov

Counting shareholders

The Form 2553 instructions let you treat a husband and wife, and their estates, as one shareholder for the 100-shareholder test, and let you treat all members of a family and their estates as one shareholder. For most small Wyoming companies the 100 limit never comes close; the one-class-of-stock and allowable-shareholder rules are the ones that trip people up.

Source: www.irs.gov