Can I change my corporation from an S Corp to a LLC?

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Can I change my corporation from an S Corp to a LLC?

I have been an S Corp for 2.5 years. I am looking for Pass through protection. 75% of our income is pass through income. Texas has a franchise tax of 1% on gross income over 1M. We have a gross income of 3.5 million. I am trying to avoid this tax, and want to know if becoming an LLC would help.

Asked on March 22, 2012 under Business Law, Texas

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

I do not believe you could convert the S Corp to an LLC; however, you could set up an LLC and then, in one or another way, sell or otherwise transfer the assets (including name, good will, intellectual property, accounts receivable) to it, getting the same effect. You should first consult with a tax specialist, like a CPA or tax attorney, to understand what business structure gives you the best tax treatment--then you should consult with an attorney who handles business formation about how best to accomplish that. The short answer is, as stated above, that while you cannot change a corporation to an LLC, you can create an LLC and transfer the assets or busines to it, which will get you to the same place. First, though, confirm that doing this will get you the benefits you want, and also not have some unanticipated costs or effects.


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