An LLC (or corporation) taxed as an S-Corporation CAN revoke a previously filed S-Election provided the decision to revoke as the proper consent (a majority vote of the shareholders/members at a minimum).
How to Revoke an S-Election
To revoke an S-election, the entity will need to file a revocation statement with the IRS at the same service center that the S-Election (Form 2553) was filed. You can find this address by looking at the Where To File in the Instructions for Form 2553. In the revocation statement, the the entity must notify the IRS that it is revoking its election to be an S corporation. The revocation statement must be:
- titled “Revocation of S Corporation Status”;
- signed/notarized by each shareholder/member who consents to the revocation;
- contain the name, address, taxpayer identification number of the shareholder/member, and the number of issued and outstanding shares of stock/membership (including non-voting stock) held by each shareholder/member at the time of the revocation along with information about the the number of shares of stock/membership units/membership percentage (including non-voting stock) issued and outstanding at the time the revocation is made.
Timing or Revocation
A revocation made during the taxable year and on or before the 15th day of the third month shall effective on the first day of such taxable year. A revocation made during the taxable year but after such 15th day shall be effective on the first day of the following tax year.
Once the S-Election is revoked, the entity’s tax status will revert back to the default classification (i.e. c-corp for corporations; disregarded entity for single-member LLCs; and partnership for multi-member LLCs).
*Please note that tax issues are complex and we are business formation attorneys, not tax specialists. As such, we must recommend that you consult a tax professional if you have specific questions or special circumstances. According to IRS Circular 230 to ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this writing was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any matters addressed herein.