Question

Which form should we use? Multi-member LLC electing C-corp tax status

Forum|Forum|4 years ago
November 17, 2021
2 replies
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What form should we choose to prepare a new return using TurboTax Business if we are Multi-member LLC but has file form 8832 to elect C-Corp tax status? Do we choose form 1065 and it will have an area in the form to specify that we already elect C-Corp tax status with the IRS or do we just use form 1120 for C-Corp?

Also, when we change our tax status from an LLC to a C-corp, do we have to liquidate all of our assets and be taxed by their gain and loss?

TurboTax Business Windows

A

Anonymous_

Employee

You should engage competent legal counsel and a tax professional.

With respect to which form to file, you would file Form 1120 if the election was to treat the entity as a C corporation for federal income tax purposes.

Generally, when property is contributed to an entity (such as a corporation), and those contributing property to the entity are in control of the entity immediately after the transfer, then the transfer is tax free,

Again, legal counsel and professional tax guidance is highly recommended.

Critter-3

Agreed ... seek local professional assistance especially if this was a 1065 partnership and you are changing to a C-Corp ... the conversion needs to be done correctly. The penalties for doing it wrong can be considerable.

S

Sang123Author

Hi all,

Thanks for the quick response. I did seek local professionals but I just want to get more opinions from other people as well to be sure. Again, this is simply a reclassification of tax status with the IRS from the default status of an LLC to a C-corp. This is NOT a formal and full conversion from an LLC to a C-corp. The only thing that we use our LLC for is for holding our Securities(stock & bonds) and the only income from those is dividends. I guess I just want to make sure that there are no rules out there that would require us to liquidate all of our stock & bonds holding when we simply seek reclassification of our tax status. Basically, we don't want those dividends to "flow-through" our personal taxes.

Rick19744

Employee

Agree with the other responses; you should have a one on one discussion with a tax professional.

Having said that, a key piece of information has not been provided; was the check the box election made at inception or was the multi-member LLC entity structure in place and in business and then you changed your entity type?

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.

S

Sang123Author

I totally understand this "*A reminder that posts in a forum such as this do not constitute tax advice.*"

At the inception, we just went with the default tax classification of the Multi-member LLC. But now we want to take advantage of the C-Corp tax structure without having to formally convert our LLC to a C-Corp.

Critter-3

What you want and what is allowed may be totally different ... go back to the local tax pros for advice instead of looking for legal advice from a nameless faceless public forum who doesn't have all the facts.