I have a c corp and my accountant suggested changing to an s corp or llc for this entity in order to prepare for retirement and tax savings. Somewhere I thought I read that you couldn’t go from c corp to llc. Any thoughts on this?
Thanks for you input.
DP
some states have a mechanism for conversion from one entity type to the other. most don’t.
C-corp to S-corp is made via IRS election and does not involve the state.
open an LLC.
then, you can give that LLC a corporate distinction. S or C
the problem isn’t setting up an entity; it’s getting the assets into the desired entity. Transferring or distributing property out of a C-corp presents certain “difficulties.”
First, I’d see if your state has a conversion mechanism. Again, going from C to S doesn’t require changes to the entity - it’s only an IRS election.
If not, then it’s probably worth a visit to the CPA to work out a plan. Of course, you have to weigh the cost of moving the assets against the overall tax strategy.
Some states do require separate state elections. I can’t remember all of them, but I think New York does… Maybe Pennsylvania, too.
BTW, sort of related to this question. You would rarely put realty into a corp, including an S corp, but especially not a C corp. The exception would be when you’re really treating the realty as inventory because you’re flipping.
The reason for this is that if you liquidate the corp (s or c) or want to retrieve the property, you do book a gain as the realty moves out of the corp. Gain equals difference between adjusted basis and FMV.