You might be considering transferring from a S corporation to an LLC and are unsure if it’s possible. The good news is that you can switch, but there are a few crucial factors to take into account first.
Terminating your S corp election is the first step in converting from a S Corp to an LLC. By completing Form 1120S with the IRS and checking the box that says you are ending your S corp status, you can do this. After doing this, you must submit articles of organization to your state in order to create the LLC.
The procedure differs slightly if you currently have a corporation and want to convert to an LLC. When forming an LLC, you must submit articles of organization to your state, and when dissolving a corporation, you must submit articles of dissolution to your state.
The ability to convert from a S corp to an LLC tax-free is one of the advantages. You must make sure that all of the S corp’s assets are transferred to the LLC at their fair market value in order to do this. Consequently, the transfer will be free of any tax repercussions.
If you change from a corporation to an LLC, do you need a new EIN? You must obtain a new EIN for the LLC if you’re changing from a corporation to one. This is so that the LLC can be treated as a new, independent entity from the corporation. However, depending on the situation, you might be allowed to keep the same EIN if you’re merely canceling your S corp election and establishing an LLC.
To sum up, it is possible to convert from a S Corp to an LLC, but it necessitates considerable thought and attention to detail. To make sure you’re choosing the best course of action for your company, be sure to speak with a skilled accountant or attorney.