November 07, 2003
There are many advantages to forming an "S" Corporation when
incorporating. In fact, many companies elect to be treated
by the IRS as S Corporations to take advantage of the "pass-through"
aspects of the tax law. The potential tax benefits are so
great that even existing corporations, if they qualify, can
elect to be treated as an S Corporation.
As a company grows more mature, it may "outgrow" its ability
to remain an S Corp. and therefore seek to convert from an
S Corporation to a C Corporation. There are numerous reasons
to convert, an example of which could be to perhaps take advantage
of a more elaborate benefits plan for its employees. Other
potential advantages of a C Corporation include nso limits
on the number of Shareholders the company can have (maximum
75 shareholders for an S Corporation), or the ability for
the company to name foreign nationals or other entities such
as corporations as shareholders.
We have been asked many times over the years about the procedure
to convert from an S Corporation to a C Corporation. The IRS
reports that there is no official form to facilitate the conversion
and therefore, the company wishing to convert must send a
letter to the IRS stating the following:
- That the corporation is revoking its choice to be treated
as an S Corporation under Sec. 1362(a) of the Internal Revenue
- The total number of shares of stock that the company has
(including nonvoting stock which has been issued and is
outstanding at the time the revocation is made.)
- The date on which the revocation is to be effective, if
a specific date is required.
- The name, address and taxpayer identification number (EIN)
of the corporation.
If your company is maturing to the level that you need to
seriously consider converting from an S to a C corporation,
Start A Business.com, Inc. is here to help. You can contact
us at 888-664-6263, or by email at firstname.lastname@example.org
with your questions, and we'll be happy to assist you in every
way we can.
The Corporate Specialist team at Start A Business.com,