View Full Version : Existing LLC to a S Corp

05-02-2017, 06:36 PM
I have had an LLC sole proprietorship 8 years and have recently contracted to a company the requires me to change to an C Corp or S Corp. Research tells me the S Corp would be the way to go. It is only me and less than $100,000 annual income and will not change. What is the simplest/cheapist way to handle this.

05-05-2017, 10:02 AM
Sorry no one has responded to your question yet. The easiest way to make the changes would be to hire someone to do it for you. The least expensive way will be to fill out the forms on your own. Here's a page from the IRS that links to pages for different business entities (https://www.irs.gov/businesses/small-businesses-self-employed/business-structures). You might have to follow a few links to other pages, but the forms should be on the site somewhere or the site should point you where you need to go. Despite it costing more, I would sooner hire someone to do this.

I'm curious why you would let another company dictate how yours is run. It shouldn't make a difference to the other company whether your business is an LLC or S Corp or C Corp. I don't know the details of your situation, but I can't imagine changing my business entity for a client or customer.

05-05-2017, 05:26 PM
I can think of two possible reasons why a company might want to deal only with corporations, and not LLCs, partnerships, or sole proprietors --- (1) companies do not have to document payments made to corporations with 1099's, whereas with other types of contractors they do have to document the payments with 1099's; (2) if you are working on site on the company's property, they would have to cover you under their worker's compensation insurance unless they can get proof from you that you already have appropriate insurance coverage; related to #1, they may be able to dodge this requirement more easily if the contractor is a corporation rather than a sole proprietor.

In terms of "converting" your LLC, the easiest (but not necessarily the least expensive) would be to consult with a business attorney in your state. Probably what they would do is have you form a new corporation which would then buy all the assets of your LLC....

There are some significant tax (etc..) consequences to converting to a corporation, so you might also want to engage the services of an accountant to help you make sure you've got all your ducks in a row. For example you can't just take a draw from the business -- as a corporation you are now considered to be an employee of the corporation, which has to pay you a reasonable wage or salary through a payroll process before you can draw from the profits as a shareholder. As an employee of your corporation, the corporation also now has liability for worker's compensation insurance (unless you can get a waiver), unemployment insurance, social security and medicare taxes, etc.......