Q: When creating a new LLC in Wyoming, can we, at a later date, change it to an S-corp?
Thank you to a client from Wyoming for that great question! Yes, you definitely can change your Wyoming LLC to an S-corp. In fact, you’re not really changing your LLC. You’re simply electing for the LLC to be taxed as an S-corp instead of as a pass-through entity. You’ll still be operating a Wyoming LLC with all the associated liability protections and benefits of flexible management, but you’ll be able to enjoy the potential tax benefits of the S-corp election. This page will explain why you may want to change a Wyoming LLC to an S-corp, and how you do it.
What is an S-Corp?
S-corps are a tax designation under subchapter S of the Internal Revenue Code. Whereas Wyoming LLCs are formed by filing Articles of Organization with Wyoming’s Secretary of State, an S-corp is created when an already existing LLC files paperwork with the IRS. Depending on the profits of your business, electing to be taxed as an S-corp may save the LLC members a substantial amount of money on self-employment taxes.
To learn more about the S-corp, check out Northwest’s page: What is an S-corp?
Benefits of S-corp vs. LLC
LLC members are not employees—they’re business owners. This means that profit from the business is subject to self-employment taxes of 15.3%. If the LLC elects to be taxed as an S-corp, the income can be divided into two parts: salary and dividends. An LLC that elects S-corp taxation will still have the personal liability protection of a regular LLC, but the tax benefits of a corporation. In an S-corp, the owners can be employees. S-corp employees will pay taxes on their salary, while additional profits can be distributed as dividends. This means that those profits will be subject to income taxes, not self-employment taxes.
S Corp Election Requirements
LLCs must meet these requirements in order to elect S-corp status:
- Be a US business
- Have no more than 100 members and shareholders
- Have only one class of stock
- Shareholders may be individuals and certain trusts and estates
- Shareholders cannot be partnerships, corporations or nonresident aliens
How Do I Change My LLC to an S-corp in Wyoming?
Remember, an S-corp is not formed in the same way that an LLC is formed. Your LLC needs to be formed first, and then elect to be taxed as an S-corp. Step one is to form your Wyoming LLC by filing Articles of Organization with Wyoming’s Secretary of State. If you’ve already formed your Wyoming LLC, then you’re halfway to S-corp status.
To change your LLC to an S-corp, you will need to file IRS Form 2553. It should be noted that in order to take advantage of the S-corp election, you’ll need to convert your LLC to an S-corp by March 15th, or within 75 days of starting the LLC. If you miss this deadline you can apply for Late S-corp Election Relief.
How Do I File My Paperwork?
If you’re forming a new Wyoming LLC, Northwest can handle your formation paperwork and file your S-corp election at the same time. Or you can print out IRS Form 2553 yourself, and file by mail or fax:
File by mail:
Department of the Treasury
IRS Center
Ogden, UT 84201
File by fax:
801-620-7116