Can I Retroactively File an LLC and Then Make the S-Corp Election?

Someone on Reddit has income better than expected and is late on forming an LLC and making the S-Corp election. They get paid as 1099 on a commission basis and want to save on self-employment tax via LLC/S-Corp. They asked: Can they file the LLC now and then make the late S-Corp election? Will they have a personal return up to that point and then both personal and business going forward? Yes. You can form an LLC (as of the date you file with the state, or earlier if your state allows a retroactive effective date) and then make a late S-Corp election by filing Form 2553 with a reasonable cause statement and requesting late election relief. The IRS can grant relief so the S-Corp is effective for a prior period (e.g., start of the tax year). Before the S-Corp is effective you report 1099 income on Schedule C on your personal return; after it is effective you file 1120-S and report K-1 on your 1040.

Bottom line: Yes. You can form an LLC (as of state filing date, or retroactive if state allows) and then make a late S-Corp election by filing Form 2553 with a reasonable cause statement and requesting late election relief. The IRS can grant relief so the S-Corp is effective for a prior period (e.g., beginning of the tax year). It is not quite the same as "I already had an LLC and just missed the 2553 deadline"; here you are forming the LLC late and then electing S-Corp late, but the idea is the same: you ask the IRS to treat the entity as an S-Corp for a period when you did not file Form 2553 on time, and the IRS may allow it if you show reasonable cause and act promptly. Reporting: Before the S-Corp is effective, report 1099 income on Schedule C on your personal return. After the S-Corp is effective, file 1120-S, take reasonable salary, take distributions, and report K-1 on your 1040. Form the LLC first, then file Form 2553 with reasonable cause; set the effective date you want. For state LLC timing, reasonable cause wording, and reasonable compensation, consult a tax professional. Margen can help you model Schedule C vs. S-Corp (salary + distributions).

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Question from Reddit

Can I retroactively file an LLC and then make the S-Corp election?

My income has been better than expected so far this year, and I'm late to the game on filing an LLC and making my tax election. I know I could request a late-filed S corp if I already had my LLC filed, but Is it the same thing if I file my LLC then make the late election? Or will I have a personal return up to this point then have both personal and business portions moving forward?

I get paid as a 1099 on a commission basis. I'd like to save as much as possible on self employment taxes, so I know the LLC/Scorp route needs to happen eventually.

Source: Reddit

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Analysis

The user wants to form an LLC (retroactively or as of now) and then make a late S-Corp election so they can reduce self-employment tax on their 1099 commission income. They are asking: (1) Is it the same as requesting a late S-Corp election when they already had an LLC, i.e., can they form the LLC first and then file Form 2553 with late-election relief? (2) Will they have a personal return (e.g., Schedule C) up to the point the S-Corp is effective, and then both personal and business (1120-S, K-1) after? The IRS allows late S-Corp elections under certain conditions (reasonable cause, etc.); the key is when the LLC existed and when the S-Corp election is effective, which drives how income is reported (Schedule C vs. S-Corp).

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Answer

Yes. You can form an LLC (as of the date you file with the state, or earlier if your state allows a retroactive effective date) and then make a late S-Corp election by filing Form 2553 with a reasonable cause statement and requesting late election relief. The IRS can grant relief so the S-Corp election is effective for a prior period (e.g., beginning of the tax year). It is not quite the same as "I already had an LLC and just missed the 2553 deadline"; here you are forming the LLC late and then electing S-Corp late, but the idea is the same: you are asking the IRS to treat the entity as an S-Corp for a period when you did not file Form 2553 on time, and the IRS may allow it if you show reasonable cause and act promptly.

How reporting works

• Before the S-Corp election is effective: You have no entity (or a brand-new LLC with no S-Corp election yet). During that period, your 1099 income is self-employment income reported on your personal return, typically on Schedule C (sole proprietor) or, if you had already formed a single-member LLC with no election, as a disregarded entity (also Schedule C). So yes: you will have a personal return (Schedule C) for the period before the S-Corp election is effective.
• After the S-Corp election is effective: The LLC is taxed as an S-Corp. You file Form 1120-S for the entity, take a reasonable salary (subject to income and payroll taxes), and can take distributions (generally not subject to self-employment tax). You receive a K-1 from the S-Corp and report that on your personal return. So you have both: a business return (1120-S) and a personal return (1040 with K-1, and possibly Schedule C for any period when the S-Corp was not in effect).
• Bottom line: You will have personal return (Schedule C) for the period before the S-Corp is effective, and personal + business (1120-S, K-1 on 1040) for the period after the S-Corp is effective. If the IRS grants late election relief and makes the S-Corp effective from the start of the tax year (or from when the LLC was formed), you may have no Schedule C for that year, only 1120-S and K-1, but that depends on the effective date the IRS accepts.

What to do

1. Form the LLC with your state as soon as you can. Check whether your state allows a retroactive effective date (e.g., first day of the tax year); that can help align the LLC's existence with the S-Corp effective date you want.
2. File Form 2553 and request late election relief: attach a statement explaining reasonable cause (e.g., you did not form the LLC in time, you were unaware of the deadline, you are now acting promptly). The Form 2553 instructions describe the requirements for late elections (e.g., Rev. Proc. 2013-30 or successor).
3. Set the effective date you want (e.g., first day of the current tax year or the date the LLC was formed) and ask the IRS to accept the election as of that date.
4. Until the election is accepted (and for any period when it is not effective), report 1099 income on Schedule C on your personal return. After the S-Corp is effective, run payroll (reasonable salary), file 1120-S, and report K-1 on your 1040.
5. Consult a tax professional to (1) confirm state rules for LLC formation and retroactive effective dates, (2) prepare the reasonable cause statement and Form 2553, and (3) plan salary vs. distributions so you maximize tax savings without running afoul of reasonable compensation rules. Margen can help you model Schedule C vs. S-Corp (salary + distributions) so you see the impact before and after the election.

Related: Converting from S-Corp Back to LLC · Lawyer Formed Us as C-Corp but We Wanted S-Corp: Do We File Form 2553? · Revoke S-Corp Election, LLC 2026 (New Jersey) · Nurse Practitioner New Grad: LLC, S-Corp, or C-Corp?

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Applicable Sections

Federal / IRS

• Form 2553: Election by a Small Business Corporation (S-Corp); must generally be filed by the 15th day of the 3rd month of the tax year (or within 2 months and 15 days of formation in certain cases). Late election relief is available under Rev. Proc. 2013-30 (or successor) if you show reasonable cause and meet other conditions. (IRS Form 2553; see instructions for late filing.)
• Schedule C: Used to report sole proprietor (or disregarded single-member LLC) income and expenses; applies to 1099 income before the S-Corp election is effective.
• Form 1120-S: S-Corp return; used after the S-Corp election is effective.

State

• State LLC formation: Formation is effective as of the date set by state law; some states allow a retroactive effective date. Check your state filing office.

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Practical Notes

• Form the LLC first (with state), then file Form 2553 with a reasonable cause statement and request late election relief so the S-Corp is effective as of the desired date (e.g., start of tax year or LLC formation).
• Before S-Corp is effective: Report 1099 income on Schedule C on your personal return (sole proprietor / disregarded LLC).
• After S-Corp is effective: File 1120-S, take reasonable salary, take distributions, report K-1 on your 1040.
• Deadlines: File Form 2553 as soon as possible; the IRS is more likely to grant late relief if you act promptly and show reasonable cause.
• Margen can help you model Schedule C vs. S-Corp (salary + distributions) so you see self-employment tax savings and plan accordingly.
• Consult a tax professional for state LLC timing, reasonable cause wording, and reasonable compensation so the S-Corp stands up to scrutiny.

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Limitations

This answer does not cover state LLC formation deadlines or retroactive effective dates in detail, or exact late-election procedures (e.g., Rev. Proc. 2013-30). For formation timing, late-election language, and reasonable compensation, consult a tax professional. Margen can help you model income and tax before and after the S-Corp election.