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Old 01-29-2014, 07:33 PM
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S-corp conversion to Single member LLC

We want to convert our S-corp (2 members, husband and wife) to Single member LLC. Do we need to dissolve and liquidate the S-corp before forming the SMLLC or this can be consider as merger from S-corp to SMLLC. Please help.

Thank you



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Old 01-29-2014, 08:39 PM
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Originally Posted by ncgketschek View Post



#1;We want to convert our S-corp (2 members, husband and wife) to Single member LLC. Do we need to dissolve and liquidate the S-corp before forming the SMLLC


#2;or this can be consider as merger from S-corp to SMLLC. Please help.
#1;actually I member, husbandandwife is treated as one owner/EE of an S corp. An LLC can elect to change its classification. Once it has changed, it cannot elect to change again for 60 months (5 years). Thus if your LLC was not originally setup as an S-corp, meaning you set it up and then changed to a S-corp classification in 2012, then you are not allowed to change the classification until 2017. In this case you might consider dissolving the S-corp and starting over as an SMLLC. You didn't mention what State the LLC will be registered in (usually your home State). Your State determines what is necessary to convert an S-corp to an LLC.There are generally two ways to accomplish this:1.) Merger - File with your secretary of state to create the new SMLLC. Merge the existing S-corp with the new SMLLC.Write in the operating agreement that the SMLLC is the surviving member of the merger.
Dissolve the S-corp. 2.) Status conversion - allowed in some states.
Call the SOS of residence for the S-corp and verify if you can convert from one business model to another by filing an official form. If Delaware is not your state of residence, be sure to check out if you can transfer the SMLLC to your state, or any "foreign SMLLC" fees charged by your state. With a merger, no dissolution of the S-corp is required.

#2;as quoted and mentioned above.You may convert to an SMLLC by creating an SMLLC and then merging the two entities, with the SMLLC designated as the surviving entity. Unless you make a specific election, the SMLLC would be "disregarded" for tax purposes and therefore you'd report taxes on Sch C/SE, without need for a cumbersome return ,1120s/Sch k1 or etc. The conversion would not open you up to creditor claims as an s corp. A major factor that differentiates an S corporation from an SMLLC is the employment tax that is paid on earnings. The owner of an SMLLC is considered to be self-employed and, as such, must pay a “self-employment tax” of 15.3% which goes toward social security and Medicare. The entire net income of the business is subject to self-employment tax.and you may deduct 50% of the seca taxes on 1040 line27.



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Old 01-29-2014, 11:48 PM
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Originally Posted by ncgketschek View Post
We want to convert our S-corp (2 members, husband and wife) to Single member LLC. Do we need to dissolve and liquidate the S-corp before forming the SMLLC or this can be consider as merger from S-corp to SMLLC. Please help.

Thank you
We got incorporated in Delaware but our home address is in Florida. Can we still register our SMLLC in Delaware?

So we only have to file Form 8832?

Thanks again



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Old 01-30-2014, 12:48 AM
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Originally Posted by ncgketschek View Post


#1;We got incorporated in Delaware but our home address is in Florida. Can we still register our SMLLC in Delaware?

#2;So we only have to file Form 8832?
#1;Yes as a foreign S corp ; you must register as a "foreign" SMLLC in DE state as It is not your home state, FL.it is a "foreign" SMLLC since the primary location of the business is outside your home state.




#2;it depends; If you prefer to file as a corp instead of a disregarded entity a smllc, then, Form 8832 must be submitted. Otherwise, you don’t need to file Form 8832. no action on your part will result in the IRS treating your single-member LLC as a disregarded entity. The reason for this is that when states started allowing LLCs, the IRS never adopted new tax codes that recognize them as such. Instead, the IRS has continued to view LLCs according to the entity types already in place: sole proprietorship, partnership, or corporation.
In your case, your LLC is single-member, so designation as a partnership is out



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