The two questions below are from clients and they illustrate the power of the LLC. One client wants to change his C-corp to an LLC. He must file a conversion with the State of Delaware and then notify the IRS. The other wants to change his LLC to be taxed like an S-corp. He doesn’t need to change his company filing with the State of Delaware. He simply files two forms with the IRS electing S-corporation tax status, and remains an LLC in structure.
I currently have a C-corp with HBS. There are only 1,000 shares of stock and I own them all. No employees and my wife is the corp. secretary. Can I convert my C-corp into an LLC? Can Harvard do it? Is it easy to do? Cost? Do I need to change the name? I assume I need to revise the Fed. EIN.
Answer: Mitch, if you have a Delaware C-corp we can easily convert it to an LLC for you, officially, with the State of Delaware and the IRS. The filing is called a “conversion”. Our service includes all document preparation, filing, Delaware filing fees, a new LLC minute book with seal and membership certificates and filing the IRS notice. Even includes shipping! The “ending” of your company name will change to LLC. Call for a quote.
I formed an LLC with HBS and now my accountant wants me to be an S-corp. Can I do this? Can Harvard do this for me?
Let me know.
Answer: Tyrone, the federal government does not recognize the LLC as an entity for tax purposes; therefore LLCs have the opportunity to elect their desired tax classification. By default, a single member LLC is classified as a “disregarded entity” or the LLC is ignored for the purpose of filing a federal tax return. Multiple member LLCs will be considered partnerships for filing purposes by default. Bear in mind, these designations are for federal tax purpose and do not change the fact the business is a Limited Liability Company. An LLC not accepting its default status must file Form 8832 to elect the entity’s classification. This form allows an LLC to be recognized as a corporation for the purposes of filing taxes. Once an LLC files form 8832 with the IRS and elects to be recognized as a corporation, it becomes eligible to file Form 2553 and elect sub-chapter S tax status. Ideally, an LLC seeking S-corp status will file Form 8832 and Form 2553 with the IRS, simultaneously.
If you have questions about CHANGING your company from one entity type to another, or electing different tax status, give us a call or drop us an email. We can’t advise you on what to do, but we can help you change from one form of entity to another, if you want to.
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