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My client wants to convert his partnership (Formed in 2022) No income for 23 and 22 and only 10k in basis to an S corp I trying to get some advice as to how we can do that > My understanding is that we have to do a 351 election of which I am not familiar with...Can I file a form 8832 to make this election and DO i have to get a new EIN number for the corporation ... any thoughts will be appreciated
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yes two partners
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2553, no new EIN (edited)
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@RP wrote:
My client wants to convert
... any thoughts will be appreciated
Make sure that it is an 'informed' want.
Have you discussed the pros and cons of the election with him, as well as the changes/additional things that need to be done for a corporation?
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Yes I did and he wants to convert
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Thanks Jim so just to clarify the LLC filed two years using form 1065 ..No income for noth Years I can make the change using form 2553
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correct
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If they're not making money, it's going to be hard to comply with the payroll requirement.
Don't yell at us; we're volunteers
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Do you mean "yes, and LLC with two members" who filed as a partnership?
"Yes, a partnership can convert to a corporation. The process can involve changing the partnership's tax status or merging the partnership into a corporation.
- File IRS Form 8832: This form changes the tax status of an LLC from a partnership to a C corporation.
- File IRS Form 2553: This form changes the tax status of an LLC from a partnership to an S corporation.
- Merge with a corporation: The partnership can merge with a newly formed corporation.
- Contribute assets to a corporation: The partnership can contribute its assets to a newly formed corporation.
- Elect to be taxed as a corporation: The partnership can elect to be taxed as a corporation for income tax purposes.
- The method chosen can affect the corporation's and stockholders' tax basis, holding period, and other collateral tax aspects.
- The change in tax status requires the recognition of deferred tax assets and liabilities.
- The initial recognition is recorded in income from continuing operations.
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There are differences between a partnership filing a 1065 and a multi-member LLC filing as a partnership filing a 1065. They are not the same.
A muti-member LLC chooses or elects to file a 1065. They could elect to file 1120 or 1120S. A partnership must file a 1065.
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"Yes, an LLC filing as a partnership can convert to a corporation by filing IRS Form 8832. This change in tax status allows the LLC to be taxed as a corporation without changing its legal form.
- File IRS Form 8832 to elect to be taxed as a corporation
- Approve a plan of conversion that includes the terms and conditions of the conversion
- Obtain the approval of the members of the LLC
- File a certificate of merger and any other required documents with the state
- Tax status: Converting to a corporation can change the tax status of the LLC
- Raising venture capital: Venture capital funds often prefer to invest in corporations over LLCs
- Corporate law: Corporate law provides a well-established framework for management and fiduciary duties
- The rules for converting an LLC to a corporation vary by state
- The conversion can have significant tax implications
- It's a good idea to consult with a business professional
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thanks so much