Can I Convert my LLC to C Corp?
You may be able to simply convert all of your LLC’s assets and liabilities over to your new C Corp. If that’s the case, you won’t have to pay taxes. An LLC can transition to a corporation, but conversion might mean more paperwork and taxes. Some states have a streamlined process that allows you to easily transition your LLC to a corporation.
How to Convert LLC to C Corp
Form a separate corporation with LLC members as shareholders. Create a merger plan and ask each member to approve it. Exchange your membership interests for shares in the new corporation. File a certificate of merger with your state. File a formal dissolution of your LLC.
EIN Change When Converting from LLC to C Corp
However, if a business changes from one entity type to another (e.g., converts from an LLC to a C Corporation), it must retire the existing EIN and obtain a new one. You will be required to obtain a new EIN if the following statement is true: A corporation files papers with the state to convert to an LLC and will use the default classification of partnership. (The corporation is treated as if it has liquidated in this case.)
If you’ve decided that conversion to a corporation makes sense for your LLC, here’s what you are in for. The paperwork and process for converting your LLC will depend on the laws of the state where you formed your company. In all states, the LLC members must approve the change and create a plan for conversion, which will detail how member ownership will convert into shares of stock. After conversion, the members become the shareholders of the corporation, and the owners transfer all assets and obligations of the LLC to the corporation. The three options for conversion are: Statutory Conversion: Some states allow for "statutory" conversion, which refers to a law that creates a streamlined process for changing the business structure.
Newly formed LLCs can file an election for the LLC to be taxed as an S corp. within two months and 15 days of the date the business begins its first tax year. In some situations, a company can take advantage of S corp. taxation despite filing the form late. A tax professional can advise you on timing, how to convert an LLC to an S corp., and how to prepare and file LLC as S corp. taxes. Whether you’re setting up a new LLC or you’ve been in business for a while, it’s worth considering whether a multi-member or single-member LLC to S corp. conversion will save you money. It can be a complicated equation, so it’s a good idea to run the numbers and get legal and financial advice before you decide.
Keep exploring the differences and benefits of different business entities to make an informed decision.