How to Change an LLC Filing as an S Corp to a Sole Proprietor

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A limited liability company, or LLC, is a business structure defined by state law which protects its members from personal liability for company activity and involves a less complicated operational structure than a corporation. The IRS requires an LLC to elect tax treatment as an S corporation, traditional corporation, partnership or sole proprietorship. If you originally elected S corporation tax treatment and decide to change that election to sole proprietorship, you must withdraw your original election and submit a new one. Sole proprietorship election for an LLC is reserved for companies with only one owner-member.

Withdraw your election to be taxed as an S corporation with the IRS. Draft a letter to the IRS requesting that your S corporation election, made when you filed IRS Form 2553 - Election by a Small Business Corporation, be withdrawn. State the effective date of the withdrawal. Send the letter to the IRS service center that processed the original election request.

Read More: How to Terminate an S-Corp Election & Revert to an LLC

Download IRS Form 8832 - Entity Classification Election - from the forms section of the IRS website. Fill out the form, following the instructions provided. Indicate, as directed, that you are changing your tax structure designation from corporation to sole proprietorship. Sign and date the form.

File Form 8832 with the IRS by mailing or faxing it to the address or fax number provided on the form.

Tips

  • Remember that once you change your election with the IRS, you cannot change it again for the next 60 months. The 60 months starts to run on the effective date of the election change.

    Review IRS Publication 3402 - Taxation of Limited Liability Companies - to make sure you understand all the implications of electing to have your limited liability company taxed as a sole proprietorship. Consider consulting an accountant, at least initially, to ensure your complete understanding of the sole proprietorship tax treatment.

References

About the Author

An attorney for more than 18 years, Jennifer Williams has served the Florida Judiciary as supervising attorney for research and drafting, and as appointed special master. Williams has a Bachelor of Arts in communications from Jacksonville University, law degree from NSU's Shepard-Broad Law Center and certificates in environmental law and Native American rights from Tulsa University Law.

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