Comments on: Making Changes: C-Corp to LLC and LLC to S-Corp

By: Jonathan

Jonathan — Thu, 31 Mar 2011 16:51:56 +0000

Paul…thanks again for your help!

By: Paul Sponaugle

Paul Sponaugle — Thu, 31 Mar 2011 16:02:01 +0000

Jonathan, yes, yes, yes, yes! At this point the State of California, and it’s agencies will be the only ones aware of your change in entity classification, but your EIN is a Federal number issued by the IRS. So, if you want to keep the same EIN and have the IRS treat the new entity accordingly, then the 8832 is necessary. Even though you may have a new State number from California, the IRS will still need to be aware of the change. Without filing 8832, then yes, your SMLLC will still be treated as a corporation because the IRS does not know otherwise.

By: Jonathan

Jonathan — Wed, 30 Mar 2011 22:26:05 +0000

Paul…Thank you very much for the response. I have a few follow-up questions which are all related: (1) Is the 8832 a necessary step despite the conversion from S Corp to LLC? (2)Is the 8832 only necessary if you want to keep the same EIN? (3)Since the new entity is a single member LLC and thus disregarded for federal purposes, an EIN isn’t really necessary (except for payroll tax purposes). So, if the SMLLC has already been issued a new Secretary of State number…is the 8832 or anything else really needed? (4)Despite the conversion, is the way the LLC is taxed carried over from the S Corp? In other words, is the SMLLC still taxed as a corporation (by default)…or is it taxed as a partnership (and treated as a disregarded entity). Is the 8832 necessary for the latter treatment?

Thank you again for the clarification. I really appreciate the help.

Jonathan

By: Paul

Paul — Wed, 30 Mar 2011 16:16:27 +0000

Hi Jonathan. It appears as though the S corp could have filed a “final” return for 2010, even though the actual conversion filing did not take place until early 2011. However, the definition of a “timely” final return in California is due on or before the 15th day of the 3rd full month after the month during which the S corporation withdrew or stops doing business in California. At this point it appears as though you have no choice but to file a 2011 short period final S Corp return, and a 2011 short period Form 568 for the newly formed LLC.

As for the EIN, the IRS says yes you do keep your EIN, but nonetheless, you are still required to make a filing to change the classification of your entity from S Corp to LLC. To keep the EIN you will need to file Form 8832 – Entity Classification Election, to change the way the entity is taxed.

By: Jonathan

Jonathan — Tue, 29 Mar 2011 03:34:14 +0000

Hello…my questions are in regards to the conversion from an S Corp to a single member LLC. What are the tax return filing requirements if such a conversion occurred in early 2011? In California, a single member LLC has to file Form 568 with the state and pay a minimum franchise tax of $800. Does this mean that there is a 2011 short period “final” corporate return (with $800 due) along with a 2011 short period Form 568 (with $800 due)? Since the conversion did not occur until 2011, does this mean that a “final” corp return can’t be filed for 2010…thus saving the client an additional $800? Also…as asked above…does the new LLC retain the corp’s EIN?

I appreciate any help. Thank you.

Jonathan