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LLC conversion to Corporation for tax purpose

To change the status of a single member LLC to a corporation may be achieved by several methods as set out below:

  • By filing a Form 8832, Entity Classification Election, for a disregarded entity to be treated as an association taxable as a corporation.
  • By filing a Form 2553, Election by a Small Business Corporation, which is treated as a deemed election for a single-member LLC to be taxed as an S corporation association.
  • The conversion of a single-member LLC treated as a disregarded entity into a corporation under the applicable state law formless conversion statute.
  • The merger of a single-member LLC treated as a disregarded entity into a corporation under the applicable state law cross-entity merger statute.

FEDERAL TAX IMPLICATIONS OF CONVERSION

When converting your LLC to a corporation it is of upmost importance to understand what type of tax status already exists in the LLC. As determined above, a single member LLC that did not elect to be treated as a corporation will be a disregarded entity and taxed as a sole proprietorship. The tax status of the LLC will determine how the company is converted.

A conversion of a single member LLC to a corporation can have significant tax consequences based on the transactions that are deemed to occur as a result of the conversion.

If an election is made in terms of Form 8832 to change classification from a disregarded entity to a corporation, it will be treated as if the owner of the disregarded entity contributed all of the assets and liabilities to the corporation in exchange for stock.

When a business entity undergoes a change in elective classification status from a disregarded entity to a corporation, the change should be treated as the transfer of all the assets and liabilities held by the owner of a former disregarded entity to a newly formed corporation, with the owner of the disregarded entity treated as the transferor.

 

TIME FRAME: 10 days to prepare the IRS package 

IRS Processing time: 2-4 months.

LLC conversion to Corporation for tax purpose

$699.00Price

     

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