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Can the S corporation status be terminated?

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Category : > S Corporaiton Election
Posted On : Sat Aug 29th,2009


S corporation status can be terminated either voluntarily or involuntarily.

    * Involuntarily: An "S" corporation status is involuntarily terminated if any event occurs that would prohibit the corporation from making the election in the first place that is a "disqualifying event". For examples disqualifying event would include having more than 75 shareholders, a shareholder that is other than an individual, estate, or trust, or a shareholder who is a non-resident alien. Generally, the election is automatically terminated as of the date on which the disqualifying event occurs. However, if a corporation has both accumulated earnings and profits as well as passive investment income that exceeds 25 percent of the corporation's gross receipts for three consecutive years, the corporation election will be terminated beginning with the following tax year.
    * Voluntarily: An S corporation election may be voluntarily revoked with the consent of shareholders holding more than 50 percent of the outstanding shares of stock (voting and nonvoting) on the day the revocation is made.


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Comments (1)
Eugene Loscialpo   wrote on : Thu Jan 10th,2013
I would like to voluntarily revoke my S corporation's election as the only shareholder. I would want it effective immediately for tax year 2013. How would I go about having this accomplished at the earliest possible time. There are no accumulated earnings or profits or passive investment. There is only about 30,000 dollars in unreturned/unavailable added captal that I will never see. Sincerely, Eugene Loscialpo President, sole shareholder Trade Winds Advisors, Inc.      View Detail
Reply :
Dear Eugene Loscialpo:

Thank you so much to choose for your business needs. You can call to Internal Revenue Service (IRS)
and your state to request to terminate S-Corporation status of your entity.

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