For example, let’s say I file form 2553 in February to elect S Corp status for my LLC with a retroactive start date of January 1 of the same year. The IRS may take two months to review form 2553, and therefore the LLC may not be approved for S Corp election until April.
So, how do I pay myself during January through April? Do I continue paying myself distributions, and then somehow convert these distributions to reasonable salary once the S Corp election is approved? Or, do I start payroll now, and behave as an S Corp with the assumption that the IRS will approve form 2553 in just a couple months?