 From
an LLC to a C corporation
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 Dear
Tax Talk,
What steps need to be taken to switch a company from an LLC to a
C Corporation?
-- Marsha
 Dear
Marsha,
A limited liability company is truly flexible
when it comes to tax time. Normally, an LLC is a partnership for
tax purposes, provided that it has two or more members. Otherwise
it is ignored, the IRS calls this "disregarded," for tax
purposes, and its activity is reported on the appropriate schedule
of its owner's tax return. For example, a one-member LLC that owns
a rental property would be ignored and the rents and expenses would
be reported on Schedule E of Form 1040, if the sole member were
an individual. If the sole member were a corporation, the activity
would be reported on the corporation's tax return.
However, an LLC with one or more members can elect
to be taxed as a corporation. While this prevents being disregarded
for a one-member LLC, I'm not sure where the wisdom was in doing
an LLC rather than a corporation. An LLC makes the election to be
treated as a corporation by filing Form
8832 with the IRS up to 75 days after the desired effective
date. Certain late filings are allowed under Revenue
Procedure 2002-59. (Warning: This is a 61-page pdf file.)
Once
you've made the corporation election, you can even elect that the LLC be taxed
as an S corporation. Hence an LLC can be disregarded, a partnership, a regular
corporation or an S corporation.
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