How to Convert Your LLC to an S Corp in Washington State

There are a few procedures you must take if you want to change your limited liability business (LLC) in Washington State from an LLC to a S Corporation (S Corp). Despite the process’s seeming complexity, it is actually quite simple and can be completed without any trouble.

It is crucial to first comprehend the distinction between an LLC and a S Corp. A corporate form known as an LLC offers its owners protection from limited liability. On the other hand, a S Corp is a type of corporation that enables its shareholders to profit from restricted liability as well as tax advantages.

The Internal Revenue Service (IRS) must receive Form 2553 in order to convert your LLC into a S Corp. Use this form to choose S Corp status for your company. You must file Articles of Amendment with the Washington Secretary of State in addition to Form 2553.

After submitting the required papers, it’s critical to confirm that your company satisfies all conditions for S Corp classification. This includes having a maximum of 100 shareholders who must all be citizens or residents of the United States. Additionally, the S Corp election requires the consent of all shareholders.

The ability to avoid double taxation is one of the advantages of a S Corp. The income of a S Corp is only taxed once, at the shareholder level, as opposed to an LLC, which is taxed as a pass-through entity. As a result, S Corp owners could have lower tax bills than LLC owners.

A further advantage of a S Corp is that it offers more ownership and control freedom. An S Corp is owned by shareholders who have the authority to choose the board of directors, as opposed to an LLC, which is normally owned and controlled by its members. This makes it possible to clearly distinguish between the ownership and management of the company.

Owners of S Corps are not regarded as independent contractors. Instead, you are regarded as a member of the company’s staff and are paid. Certain tax deductions, including the self-employment tax deduction, may be affected by this.

To sum up, in order to convert your LLC to a S Corp in Washington State, you must submit the required documentation to the IRS and the Washington Secretary of State, satisfy the prerequisites for S Corp status, and comprehend the advantages and drawbacks of this corporate structure. Even while the process could appear difficult, many firms that want to benefit from a S Corp’s tax and ownership advantages may find it to be a desirable choice.