C to S or S to C Corporation Change

Posted by Andy
If you already have a corporation, you may be considering whether it should be changed from and S to a C or a C to an S. This is not an easy decision or one that should be undertaken lightly, becuase the tax consequences to your change could be great. This site does a fair job of outlining the differences between an S and a C corporation and why you might want to switch from one to the other.

Just know that switching from a C to an S does not avoid taxation on any retained earnings you have already earned or assets that have appreciated but not sold. There is a 10 year waiting period for selling any assets (including receivables and goodwill) held by a C that has converted to an S. The BIG tax (Built in Gains) goes away after 10 years, but if you are considering converting from a C to an S you would be wise to have an appriasal done of your business just in case you need to sell an asset before the 10 year time limit expires.
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The content on this blog (www.acollinscpa.blogspot.com) is my personal opinion based on my study and understanding of tax laws, policies and regulations. It’s provided for your private, noncommercial, educational and informational purposes only. It’s not a recommendation or endorsement of any company or product. It should not be relied upon as specific tax advice for your personal situation. I strongly suggest that when it comes to filing your taxes, you get additional, professional guidance from individuals who are familiar with your specific circumstances. Those who choose to rely solely upon the information on this site do so at their own risk and peril, and cannot hold the author liable in any form or fashion.

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