Thursday, May 14, 2009

LLC to S-Corporation Conversion Clarified

The IRS has issued a new ruling that applies to a Limited Liability Company (LLC) electing to be taxed as an S-corporation. The ruling clarifies that there does not need to be a short tax year as a C-corporation in the middle of the process of converting from a “partnership” (the default tax status of an LLC) to an S-corporation. Avoidance of the accounting and tax burdens of an intervening C-corporation tax year is welcome to all involved.