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!