There are a few key steps you’ll need to take in order to convert your C corporation into an S corporation. First, you’ll need to file Articles of Incorporation with your state’s Secretary of State. Once that’s done, you’ll need to file an IRS Form 2553 with the IRS. Finally, you’ll need to notify your shareholders of the change and amend your corporate bylaws accordingly.
The process of converting a C corporation into an S corporation is often referred to as a “Subchapter S election.” This is because, once the conversion is complete, the corporation will be taxed under Subchapter S of the Internal Revenue Code.
One of the main benefits of converting to an S corporation is that it can save your business money on taxes. That’s because S corporations are only taxed once, at the shareholder level, while C corporations are taxed twice, once at the corporate level and again at the shareholder level.
Another benefit of converting to an S corporation is that it can help you avoid the “double taxation” that can occur with C corporations. Double taxation occurs when a corporation is taxed on its profits, and then its shareholders are also taxed on their dividends.
If you’re thinking of converting your C corporation into an S corporation, there are a few things you should keep in mind. First, not all businesses are eligible to make the switch. In order to qualify, your corporation must meet certain requirements set forth by the IRS. Second, converting to an S corporation can have some negative tax consequences for your business, so it’s important to speak with a tax advisor before making the switch.
