Hello and thank you for your question.
[How to Incorporate]
The 'how' of changing your LLC to an S Corp is to file a certificate
of incorporation with the Nevada Secretary of State. The process for
an existing LLC has a few steps to follow: If you plan to use the
same name (but with 'Inc.' or 'Ltd.' at the end instead of 'LLC' or
'Limited Liability Company' the secretary of State may require you to
file on behalf of the LLC a paper allowing the use of the similar
name. Also you will need incorporation minutes, a certificate of
incorporation, a designation of the Secy of State as an Agent for
Service of Process and share certificates. And the LLC will need to
file a document showing that it has merged into the new corporation.
There's no shortage of companies on the internet who will do all the
work for you:
Google Search "nevada "secretary of state" incorporate
://www.google.com/search?hl=en&lr=&ie=ISO-8859-1&q=%22nevada+%22secretary+of+state%22++incorporate+&btnG=Google+Search
Or you can save some money and gain some knowledge by doing it
yourself, following the steps on the Nevada Secy of State Website
SEcretary of State
http://soscommerce.state.nv.us/
[Why Incorporate--the tax implications]
Frankly, I think you're just as well or better off remaining an LLC
than incorporating. What LLCs and S Corps have in common is they
provide limited liability to their owners (so if the entity is sued,
its own assets are at risk but not the personal assets of its owners),
and for tax purposes they function as flow-through entities, which
means that their taxable income and deductions are reported on the
owners' personal income tax returns.
The differences are:
LLCs are taxed as partnerships, and file IRS form 1065
www.irs.gov/pub/irs-pdf/f1065.pdf
S corps must file elections to be treated as flow through entities
(otherwise they are C corps which you don't want) and thereafter the
file IRS form 1120S
www.irs.gov/pub/irs-pdf/f1120s.pdf
S corps in order to retain their treatment as flowthrough entities
must comply with the technical requirements of Sections 1361 et seq of
the internal revenue code, and if they mess up (for example by having
too much passive income) they can lose their S status
http://www.irs.gov/pub/irs-wd/0002039.pdf
So the bottom line is that as owners of the LLC, you already have the
limited liability protection and flow-through tax treatment that you
need.
As you might imagine, this is a complex area and there are lots of
ancillary issues, but none of them are going to make a significant
difference. If you want to know more about these issues, please read
through the following material:
Incorporation (C Corp, S Corp, LLC)
Browse articles by: Title A - Z
http://www.inc.com/articles/legal/gen_biz_law/incorporation/
Search terms used:
"nevada "secretary of state" incorporate
"section 1361" site:irs.gov
passive "section 1361" site:irs.gov
Thanks again for giving me the opportunity to answer your question.
Sincerely,
richard-ga |
