Hello, thanks for your question and thanks for requesting me
How are you today?
The transfer of assets is tax free in and of itself, but the LLC members will still be taxed on the profits that were earned by the LLC prior to the conversion.
This is not an additional tax, but it is true that they will owe this tax even if no funds have been dispersed to them.
There's no way around this.
Also, the corporation will not be double taxed on the cash. Tax was paid on the profits when earned. The Corp does not pay tax on the receipt of cash
they cant get that money out of the corporation without being taxed either, correct?
but, this money is taxed again at the personal level when paid out as salary or dividends
No, if you take a dividend from the corp, it is taxed
OK, thank you for your quick reply
Yes, any way you pull money from a corp is taxed...dividends, salary, etc
If they want the cash, they should take it before the conversion
regarding the liquidation
right, so we should ideally pay out all the cash before conversion
Yes, if you do not want to be taxed on that money again, yes.
do we need ot take out all prfoits, or only those profits less the members basis?
only the profits less the the members basis would work
technically, this conversion ahpopened in april
since state law does not recognise that the LLC needs to be liquidated immediately
can we pay out that cash now as a distribution from the LLC?
Okay if the conversion already took place there's nothing that you can do
The funds are now in the corp, correct?
well the checking account is shared
unless the converison law say that ALL cash has to be transferred
we could say its still in the LLC
No, the law of the conversion would apply that the funds are now in the corporation
Is there anything else that I can assist you with today?
Not right now, but thanks for your quick reply
and we may come back in the future
Okay please do
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ok looking to see where i do that
There's a feature along the bottom of your screen that has either 5 stars or 5 smiley faces
ok good done
3-5 stars or smileys gives me full credit