How can shareholders voluntarily revoke a S corporation's S-Election so it is effective immediately? Shareholders want to immediately switch to a C-corporation and not wait
until the end of the corporation's tax year, i.e., have a short tax year.
You have to have a valid vote of more than 50% of the shareholders and file a revocation that states as of what date you want the revocation to be effective. See the link below for some information. You can have it effective at a date AFTER you file the revocation but before the next tax year if you so specify.
BUT... since I don't believe there is a specific form for revocation of an S election it might be well worth your while hiring a CPA to file the revocation for you.
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I agree with my colleague. While the shareholders may vote to revoke a Subchapter S election, you should not do so until you have thoroughly discussed the tax ramifications with your tax advisors.
The traditional way to immediately revoke an S election is to violate one of the S corporation rules - authorize and issue a second class of stock is a classic. Another would be to transfer some stock to an entity that would not qualify as a shareholder of an S corporation like another corporation.
Wikipedia says this about S Corporations:
Must have only one class of stock.
Must not have more than 100 shareholders.
Shareholders must be U.S. citizens or residents, and must be natural persons, so corporate shareholders and partnerships are generally excluded.
Violation of any one of these rules revokes the election.
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