Form 8832 is the one-page IRS tax election form required to elect that an LLC be taxed as a C-Corporation. The form must be filed with the IRS within 75 days of formation to take immediate effect. Otherwise, the election will apply to the following tax year. The LLC would also obtain an Employer Identification Number (EIN) to include on Form 8832 if it had not already done so.
What Is the Benefit of a C Corporation?
C Corporation is the default tax status of all Corporations, which requires filing the Form 1120 tax return to report its income on a calendar or fiscal year basis. An LLC may elect to be taxed as a C-Corporation by filing a Form 8832. A C-Corporation may carry its losses forward from one tax year to the next. People often think of the C-corporation as being subject to “double taxation” which is true. However, even with double taxation, there are many options to reduce one’s taxes.
For tax years beginning after December 31, 2017, a permanent change was made to a flat tax rate of 21% on all taxable income of C-Corps.
Once the corporate election is made, the LLC will be subject corporate taxation for a minimum of five years before a new election can be made.