LLC midyear S Election

LLC would like to have converted to an S Corp years ago, but they have a foreign minority owner. That owner was recently bought out, and they'd like to make an S Election effective the day he was bought out.

I assume in the year of a midyear election they would file a 1065, marked 'final', then file a short year 1120S, marked 'initial return'??

Marking final on the 1065 doesn't do anything to "close out" that EIN does it? It's simply a final 1065, right?

Any pitfalls I need to be aware of with a midyear election?

If we are filing a final 1065, can I assume it needs to be filed 3 1/2 months from the date of the S Election?

Pretty sure election is for the beginning of a year.

You can make a mid-year S-election, you will usually just file a short year tax return, since most s-corps are calendar year corps.

I've successfully made mid-year s-elections.

With a final 1065, I think you'll need a new EIN for the s-corp.

I don't think so/I've never gotten a new one. You fill out the 2553 with the LLC EIN.

Pretty sure election is for the beginning of a year.

You can make a mid-year S-election, …

Instructions excerpt:

Item E. Effective Date of Election
Form 2553 generally must be filed no later than 2 months and 15 days after the date entered for item
E. For details and exceptions, see When To Make the Election, earlier.
A corporation (or entity eligible to elect to be treated as a corporation) making the election effective for its first tax year in existence should enter the earliest of the following dates:
The date the corporation (entity) first had shareholders (owners),
The date the corporation (entity) first had assets, or The date the corporation (entity) began doing business.
!CAUTION
When the corporation (entity) is making the election
for its first tax year in existence, it will usually enter the beginning date of a tax year that begins on a
date other than January 1.

Thanks, Len. I've never heard of a mid-year election. Unless you mean forming a new corp, but that's not a mid year election.

I don't think so/I've never gotten a new one. You fill out the 2553 with the LLC EIN.

You're right...I was thinking of a technical termination of a partnership. There you DO need a new EIN.

When an LLC makes an election to be treated as an association taxed as a corporation and makes an election to be an S corporation effective on the same day, which day is somewhere in the middle of the calendar year, does that start a new tax year for the entity, and is that not the case for a C corporation that tries to make a "mid-year S election"?

I have always run into trouble when a C corporation tries to make an S election, and tries to have it effective "in mid-year." The Regs at 1362 explain this quite carefully, IIRC, but the rules for LLCs are, quite likely, just a little bit different...

Ah, well put professor. I was late in getting to that understanding. Makes perfect sense since he's effectively inc'ing, so a new entity begins.

PBR being faxed over.

Is there a deemed 351 exchange when an LLC chooses to be treated as an association? Is that why these two things are dissimilar?

Seems somehow unfair that the LLC gets the loosey-goosy rule while the C corporation gets the shaft...

I learned long ago, though I require repeat lessons from time to time, that the tax code isn't designed to be fair.

Good discussion. Appreciate your help.

"When an LLC makes an election to be treated as an association taxed as a corporation and makes an election to be an S corporation effective on the same day, which day is somewhere in the middle of the calendar year, does that start a new tax year for the entity, and is that not the case for a C corporation that tries to make a "mid-year S election"?"

I don't actually see the answer to this question which is almost my question as well. If a Schedule C filer decides to form an LLC with S-Corp election mid year, what date do they enter in Item E on Form 2553:" Election is to be effective for tax year beginning". Can they elect to be an S-Corp for the full year even though they did not incorporate until May? Does this require a late filing designation with reference to Rev Proc 2013-30?

They cannot have an effective S election at any time during 2016 before the LLC was formed. The deadline for filing an S election to be effective as of May 9, 2016 has passed. The S election might be made effective May 9, 2016 if the LLC qualifies for relief.

Thank you. Does this indicate that they would need to file 2 returns for 2016. Jan - May 8 Schedule C and thereafter 1120S?

Yes 2 returns for 2016 - Sch C and 1120S. 1120S may or may not begin on May 9.

Thank you.

What would be filing deadline for a partnership electing to be taxed as S corp middle of year, e.g. S election date 7/1
Is 1065 due September 15th for it's Final Return or March 15th following year.
Tried to find on IRS.gov, couldn't find any except, which relates to C corp to S Election .....

Filing Requirements for Filing Status Change
(revised 11-15-11)

....Step 3. File the last C Corporation return (Form 1120) by the due date or extended due date.