Tax reform may have you thinking of changing your S corporation to a C corporation, partnership, or sole proprietorship.

With such a switch, you need to consider:

  • How do I terminate the S corporation election correctly?
  • What are the tax consequences to me?

If you want to turn your S corporation into a C corporation, you file an S corporation election revocation statement with the IRS. Your corporation is then a C corporation for federal tax purposes.

If you don’t want your business to be either an S or a C corporation, you liquidate the S corporation and contribute the assets to a new business entity.

If you chose S corporation taxation for your limited liability company (LLC), changing that election is a little more complicated.

First, you must file the S corporation election revocation statement with the IRS. The tax law then treats your LLC as a C corporation for federal tax purposes.

If that’s what you want, stop there.

If you want a disregarded entity (single-member LLC) or a partnership (multi-member LLC), you also need to file Form 8832, Entity Classification Election, to revoke the C corporation election.

 

Please contact the Sarasota CPAs at Sterling Tax & Accounting for more information!