A conversion is a filing that is made with the state of incorporation allowing a company to change from one business type to another. For example, if a business was originally formed as a limited liability company (LLC) and the owner wishes to change the structure to a corporation, they may wish to file a conversion as opposed to forming a completely new business.
No, the process differs from state to state and also depends on the type of conversion, for example limited liability company (LLC) to corporation or corporation to LLC. In the most difficult instance, business owners must create a new company, transfer company assets from the old to the new one, and dissolve the old company. You can contact our Incorporation Specialists to learn more about the conversion process and requirements for your state.
Can I convert my C corporation to an S corporation?
Yes, but it is not considered a conversion. An S corporation, or subchapter S corporation, is a standard corporation (C corporation) that has elected special tax status with the IRS. To elect S corporation status, a timely filing of Form 2553 must be made with the IRS. You can learn more about C corporations and S corporations in our Learning Center, for example the article S Corporation vs. C Corporation: A Comparison.
Yes, a change in entity status may require immediate or future tax costs. For example, if you liquidate a corporation in order to form a limited liability company (LLC), there may be tax to both the corporation and its shareholders. If, however, the corporation has losses, there may be no tax upon liquidation. It is best to seek the assistance of an accountant or tax advisor for advice on your particular situation.