Legal Question in Business Law in New York

Re: Turning a C Corp to LLC in 2nd year before tax filing

I am a financial services attorney that is counsel to a law firm with a strong tax department (see www.hartmancraven.com). Generally, a conversion from a C Corporation to an LLC is a taxable transaction. However, depending on the financial condition of the corporation and the tax basis of each shareholder, the tax could be minimal. There are ways to structure the transaction that can potentially minimize the tax. One would need to see a balance sheet of the corporation in order to help you devise a tax minimizing conversion plan.

Feel free to contact me if you would like more information.

The above is a general discussion and should not be construed as legal or tax advice.

Good luck.

Re: Turning a C Corp to LLC in 2nd year before tax filing

Dear sir or madam:

To determine whether an LLC or C corp is a better form for you, I would need to discuss several factors with you, including: your individual sources of income, your individual levels of income, the relationships between you and your shareholders, your comfort with paying estimated taxes, etc.

If, in fact, you and your associates are better suited to conduct business as an LLC, it is unfortunate that you began as a C Corp. If you have been conducting the C corp business properly (with bank accounts in the C corp name, under the C corp's own Tax ID number, etc.) then you will have to file your C corp's 2004 tax return (or at least a partial 2004 tax return), dissolve the C corp, form the LLC, and transfer your respective interests to the LLC (by merger, asset purchase, etc.).

In sum, you will an attorney's assistance to:

1. Determine whether an LLC is a superior form for you and your fellow shareholdders;

2. if so, the attorney must dissolve the C corp;

3. form the LLC; and

4. execute the transfer of your interest (whatever the form) to the LLC.

You will also need assistance with all necessary tax filings.

A potential simpler solution is to elect for S Corp status.

My firm can provide each of these solutions. Contact me at [email protected] if you would like my assistance.

Very truly yours,

Anthony S. Park

Re: Turning a C Corp to LLC in 2nd year before tax filing

As you probably have already surmised based on my colleagues' suggestions, your matter is complex and tax-driven. Accordingly, your matter is difficult to address via a legal information website.

My practice does not provide the detailed tax advice that your matter requires. Accordingly, I suggest that you engage an experienced accountant and/or tax counsel.

If you would like a no-obligation referral to an experienced professional, feel free to call me or send me an e-mail.

Peter Papagianakis

Business Law Firm LLC

[email protected]

(917) 478-0570