Subchapter S Corporations: Not So Much
Limited liability companies have long since eclipsed S corporations as the entity of choice for middle market companies. While S corporations still have certain tax advantages, S corporations rarely commend themselves when the company is likely to grow in a meaningful way, admit employees or others as owners or become a platform for meaningful estate planning.
It has occurred to many of us to convert an S corporation into an LLC. That, we know, is usually a taxable event. The “toll charge” (in the form of federal and state tax) in order to migrate from subchapter S to subchapter K can be hefty.
But at a time when company values may still be modest (relative to where they were before 2008), there are definitely techniques short of liquidation that are worth considering.
For detail on one of the techniques we often use, the drop-down into an LLC, click here.