Atlanta CPA on How a Georgia LLC and Legally Convert to a Georgia S Corporation for Tax Purposes
Atlanta CPA on How a Georgia LLC and Legally Convert to a Georgia S Corporation for Tax Purposes
Converting your LLC to an S Corporation Might Save You Money
Though S Corps came into vogue in the 1950’s when Congress passed legislation allowing business owners to pay their taxes on their business profits on their personal return, an Limited Liability Company (LLC) is a relative newcomer on the tax scene. Like an S Corporation the earnings from an LLC and their corresponding taxes are paid on the respective shareholders personal return. Though S Corporations earnings, as well as their shareholder distributions, have to be reported/paid based upon the S Corporations stock ownership, an LLC and its owners are legally able to allocate monies to its owners in any method or percentage that its members agree.
Disregarded Entities. Like an S Corporation, the earnings from an LLC are communicated to its owners via a K-1, which is a part of the Partnership Return/Form 1065. However it you are the sole-owner of an LLC, then you should file as part of your personal return a schedule C, which is the form that proprietorships as well use to report their operating results. Both an S Corporation and an LLC are considered “disregarded entities” for income tax purposes, which means that the entity does not pay income tax on the company’s earnings but that the owners pay/report their share of their personal income taxes.
Tax Differences. An LLC like an S Corporation has the tax advantage of not being subject to the double taxation affect of a C Corporation. An LLC pays FICA/Medicaid taxes on all of its net earnings, as long as all active employee/owners have paid themselves a fair and reasonable salary given position and profit. When an LLC converts over to an S Corporation, it does for predominantly for income tax purposes, qualified retirement plans and the need to pay a salary to its owners. For all other legal purposes the LLC that converts to an S Corporation for tax purposes remains an LLC for all of its other needs and issues. Thus, from a legal perspective the LLC remains an LLC in the eyes of the courts and the Secretary of State’s Office. In general terms the predominant legal differences are that an S Corporation will have directors, shareholders and officers whereas an LLC while have members; the owners.
Converting to an S Corporation. Whether your business had hundreds of clients, just a handful for only yourself. converting to S Corporation status, if you qualify is a prudent and sound financial decision. To be an S Corporation you have to meet four criteria. They include having less than one hundred owners/shareholders, all of your owners have to be citizens/resident aliens of the United States, that you are required to have a calendar year end and to have only one class of stock; as an LLC you will not have any. To convert your LLC to an S Corporation for income tax purposes you should complete Form 2553: Election to be a Small Business Incorporation. Generally this form should be filed within seventy-five days of the incorporation date or the first date of the tax year to which you desire the election to be effective. If you fail to meet these deadlines, the IRS has issued Revenue Procedures that, if you qualify, will allow an entity to receive the requested S Corporation effective date.
John Dillard is a Christian Speaker/Author and Certified Public Accountant (All Rights Reserved). To See how he takes Christ along with him to work visit http://www.hiscpa.com/ (An Atlanta CPA firm) and for his latest book Overcoming Life’s 9/11’s: Job’s Journey and to learn about his ministry visit http://www.john-dillard.com/ To contact John Dillard CPA (Atlanta Christian Author/Speaker) today call 770. 814.9304 proudly serving Duluth, GA, Gwinnett County and Beyond.
“Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!” What, then, shall we say in response to this? If God is for us, who can be against us? Romans 8:31
Why are these verses here? Learn how HIS CPA became a Christian Accounting firm visit http://www.hiscpa.com/christian-CPA.html
We advise clients on: IRS representation, Offer in Compromise, Tax Problems, Incorporation in Georgia, Corporate and Personal Income Tax Returns, Part-time CFO, Virtual Controller, Business Planning, Offer in Compromise, Back Taxes, Business Acquisitions/Sales, Forensic Accounting, Business Valuations and Bookkeeping.
Serving Atlanta, Duluth, Gwinnett, Barrow, Bartow, Carroll, Cherokee, Clayton, Coweta, Douglas, Fayette, Forsyth, Fulton, Gwinnett, Henry, Newton, Paulding, Pickens, Rockdale, Walton, Barrow, Bartow, Carroll, Henry, Newton, Bartow, Walton, Rockdale, Barrow, Spalding, Coweta, Dawson, Douglas, Fayette, Newton, Paulding, Spalding, Walton, Henry, Paulding, Douglas, Coweta, Canton, Covington, Douglasville, Druid Hills, East Point, Forest Park, Griffin, Lithonia, Mableton, McDonough, Milton, Mountain Park, Newnan, Powder Springs, Stockbridge, Union City, Villa Rica, Winder, Woodstock, Smyrna, Sandy Springs, Marietta, East Point, Gainesville, Snellville, Buckhead, Buford, Peachtree City, Dunwoody, Kennesaw, Decatur, Conyers, Stone Mountain, North Fulton County, DeKalb County, Hall County, Clayton County, Cobb County, Forsyth County, Hart County, Jefferson County, Duluth, Atlanta, Alpharetta, Johns Creek, Lawrenceville, Milton, Norcross, Snellville, Roswell, Buford, Cumming, Grayson, Lake Hartwell, Suwanee, Sugar Hill, Loganville, Lilburn, Dunwoody, Gainesville, Decatur, Atlanta GA, Gwinnett County, North Fulton County, Cherokee County, DeKalb County, Hall County, Clayton County, Cobb County, Forsyth County, Hart County, Jefferson County, Duluth, Atlanta, Alpharetta, Johns Creek, Lawrenceville, Marietta, Milton, Norcross, Snellville, Roswell, Buford, Smyrna, Marietta, Cumming, Grayson, Hartwell, Suwanee, Sugar Hill, Loganville, Lilburn, East Point, Gainesville, Snellville, Buckhead, Buford, Peachtree City, Dunwoody, Kennesaw, Decatur, Conyers, Stone Mountain, Decatur. Sandy Springs, Peachtree City, Douglasville, Newnan, Griffin, Woodstock, Carrollton, Forest Park, Canton, College Park, Cartersville, McDonough, Riverdale, Fayetteville, Covington, Stockbridge, Conyers, Clarkston, Barrow, Bartow, Butts, Carroll, Cherokee, Clayton, Coweta, Dawson, and Douglas.
Sphere: Related ContentRelated posts:
- Atlanta CPA Advises on Whether Your Georgia LLC Should Convert Over to an S Corporation for Tax Purposes
- Atlanta CPA on Should You Convert Your New Georgia LLC to an S Corporation for Tax Return Preparation Purposes
- Atlanta CPA on How You Can Convert your Georgia C Corporation to an S Corporation Thereby Avoiding Double Taxation
- Gwinnett CPA on Whether You Should Incorporate Your New Georgia Business or Convert Your LLC to an S Corporation for tax purposes
- LLC’s can Legally Convert to an S Corporation Saving Thousands Annually
