S Corp to LLC

[S T]

I am lost, Question,

Original entity setup an S Corp, closed and reogranized under LLC

How do you transfer basis to an LLC? How to report on tax forms? I have transferred from a Schedule C client before to a partnership or a S Corp, but have not transferred from an S Corp to a LLC.

What happens to the S Corp stock when the S Corp is closed and the new entity is opened under an LLC not electing S Corp?

There are also shareholder loans involved at the S Corp level.


Sandy

[Davc]

I am lost, Question,

Original entity setup an S Corp, closed and reogranized under LLC

How do you transfer basis to an LLC?

You don't. You dissolve the Corp exactly as if there was not going to be an LLC then the ex-shareholders form an LLC contributing assets they received in step 1.

[Burke]

Actually, you can. At least in the State of Florida. I just downloaded forms to form an LLC in that state which includes "Certificate of Conversion for Other Business Entity" and states the requirements for converting from a FL corp, Fl GP or LLP, FL LP or LLLP, and "all others." So it might vary from state to state. However, I like the clean break theory stated above.

[les grans]

I'm quite certain that how the state of Florida allows you to "convert" from an S corporation to an LLC has *nothing* to do with how the income tax rules apply to the transaction. In my experience, the only way to get out of an S corporation and into a partnership (or LLC) is a taxable (!) liquidation of the S corporation and then contributing the assets to the newly-formed (or maybe long-standing) LLC. And if there's a tax loss on the liquidation of the S corporation it's probably not deductible because of related party issues.
This isn't an easy transaction; it's *not* tax-free, and involves the fair market values of the assets of the S corporation - including any business intangibles like "goodwill" etc., which always involves a potential challenge from the IRS.

[Burke]

I'm quite certain that how the state of Florida allows you to "convert" from an S corporation to an LLC has *nothing* to do with how the income tax rules apply to the transaction. .

I agree. I was not addressing the taxation issues, just the procedural ones.