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LLC to S Corp Conversions and S Corp to LLC Conversions: Benefits and Caveats, Step-by-Step Examples

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Wednesday, April 5, 2023

Recorded event now available

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This webinar will explain the advantages and disadvantages of LLC to S corporation conversions and S corporation to LLC conversions. Our panel of partnership experts will address critical considerations before changing an entity classification, including when a business' circumstances warrant a change, and they will walk tax professionals through the process of changing an entity's tax classification.

Description

Many clients can benefit from converting their single-member LLC or LLC/partnership to an S corporation. An S corporation status provides several advantages; perhaps the most popular is the ability to limit self-employment taxes paid by its owners. There are also key disadvantages that tax advisers and owners should weigh. Reasonable compensation must be paid to shareholders and an 1120-S must be filed. A chief concern has been that LLC agreements often include distribution provisions that can create a second class of stock, invalidating a Subchapter S election. Fortunately, the IRS recently released Revenue Procedure 2022-19 which provides relief for this and other missteps often encountered by S corporations and shareholders.

In addition to LLC to S corporation conversions, many taxpayers benefit from an S to LLC conversion. LLCs provide greater flexibility for distributions and management, and an S corporation can offer greater asset protection. As with S corporation to LLC conversions, there are caveats. The partnership tax provisions are complex and compliance can be a challenge. Also, LLC earnings are often subject to self-employment tax. Whether converting from an LLC to an S corporation or vice versa specific steps must be followed to ensure a smooth transition.

Listen as our panel of flow-through experts reviews the benefits and caveats of LLC and S corporation conversions and the steps to take to affect these conversions.

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Outline

  1. LLC to S corporation
    1. Benefits of conversion
    2. Caveats
    3. Steps to conversion
  2. S corporation to LLC
    1. Benefits of conversion
    2. Caveats
    3. Steps to conversion
  3. Best practices

Benefits

The panel will review these and other critical issues:

  • Identifying entities that could benefit from LLC to S or S to LLC conversions
  • Applying Revenue Procedure 2022-19 to avoid conversion missteps
  • Understanding the caveats of LLC to S corporation conversions
  • Examples of the steps needed and options available to transfer S corporation ownership to an LLC

Faculty

Alfonsi, John
John T. Alfonsi, CPA
Managing Director
Cendrowski Corporate Advisors

Mr. Alfonsi has 25 years of tax consulting, business valuation, litigation support and forensic accounting experience....  |  Read More

Dyer, Marcus
Marcus E. Dyer, CPA, JD
Principal, Team Leader of Tax Controversy
Withum Smith+Brown

Mr. Dyer manages and reviews all aspects of federal and state tax compliance for C-corporation, S corporation and...  |  Read More

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