In today's video
I am going to talk to you about how to convert an S-corp to an LLC
So, you probably clicked on this video because you want to learn how to convert an
S corporation to an LLC
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So let's go ahead and talk about what you want to be mindful of when deciding to
convert an S Corp to an LLC
There are tax consequences of converting an S Corp to an LLC
There are some tax consequences of converting as Corp to LLC
and it is important that you are aware of such tax implications before
converting your S Corp to an LLC
both escorts and LLCs limited liability companies offer limited
liability
Other advantages of LLCs are that they offer flexibility in terms of
the company's operations
little formalities and additional options for managing and oversights of the
business. Therefore
there are many escorts that wish to convert to an LLC
Poor such benefits
Another reason for converting from an S Corp to an LLC is due to the fact that
LLCs can be treated as a partnership for federal tax purposes
Being treated as a partnership for tax reasons provides enhanced flexibility
over the tax rules for corporations
both LLCs and escorts are treated as pass through entities for tax purposes
This means that any income deductions and tax credits are passed through to the
owners of the business and therefore are filed on those owners individual tax
returns
There is also no corporate tax return that must be filed for an LLC or S-corp
for this reason
These two types of business structures avoid the issue of double taxation
C Corp's are subject to double taxation
As these corporations are first taxed at the corporate level
And then if the company passes on additional profit to the shareholders in the
form of dividends
those dividends would have to be reported on those shareholders
personal tax returns
So how to convert from an S Corp to an LLC before you choose to
convert your business structure
you should always think of all of the consequences of such a conversion
While there could be many benefits. There are usually some consequences too
You'll probably have to liquidate your S-Corp
which will then be recognized as a gain under section three, three, six,
as if it sold all of its assets
If the Corp's assets have increased between the time of formation of the
business and the time of conversion to an LLC, it capital gain is realized
This means that the shareholders must pay capital gains tax on the amount of
that game. With that being said
you might still want to convert your business structure
particularly in the following circumstances
the S-corp wants to create a liability shield. In most States
LLC members are shielded from creditors under what are called charging
orders statutes. Again, that's charging order statutes
The -Corp wants to liquidate assets ahead of time while the S-Corp
is required to liquidate assets when converting to an LLC
this is also the main tax consequence
It could also be viewed as a benefit to an S-Corp that continues to grow
exponentially. Therefore
the S-Corp might want to convert while the tax consequences of such
liquidation would be lower than at a later point
When the tax would continue to grow based on the amounts of assets being
liquidated. If the escort brings in a new investor
this will cause the termination of the selected Corp
which will result in tax implications. For that reason
the S-Corp may want to convert to an LLC before choosing an
additional investor
Some escorts want to convert to an LLC
but still be taxed as an escort. There are two ways to do this
The first is to create an LLC and subsequently convert the corporation and
to the LLC
The corporation will then be referred to as an LLC and the corporation's assets
will transfer to the new LLC
The second way is to merge the corporation into an existing LLC that already has
assets. When a corporation has assets with built in appreciation
the conversion to an LLC can still allow that corporation to be taxed as an S-
Corp, but operate as an LLC
The only issue you might face would be whether or not the conversion increases
income tax
as you are now transferring over assets from the corporation into an LLC that
also has profits of its own
So in determining whether or not converting an S-Corp to an LLC will
benefit you. It all depends on your situation
I do advise that you speak with a professional in order to determine whether or
not such a conversion would be beneficial to you
Again, there are sorts of things that you're going to want to be mindful of
but in the end
converting your S-Corp to an LLC may provide you with great
benefits
An LLC is one of the simplest business entities and structures
to operate and manage. So based on your business
based on how many members you have based on whether you have investors
you may want to decide to convert your S-Corp to an LLC
If you happen to have any questions about anything I talk about in today's
video
click the link in the description box below to schedule your free consultation
with a professional who can help determine whether or not an S-corp
or an LLC is best for you. If you haven't already
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