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Mark Taylor
Mark Taylor, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2031
Experience:  Certified Public Accountant
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I am looking to convert my LLC to a C Corporation. I wanted

Customer Question

I am looking to convert my LLC to a C Corporation. I wanted to know if it's better to do that effective Jan 1st 2017 or right away from a tax perspective?
Submitted: 8 months ago.
Category: Tax
Expert:  Mark Taylor replied 8 months ago.

Hi, my name is Mark. I will be happy to help you with your questions. From an administrative standpoint it would make more sense to do the conversion on 1/1/2017. This will prevent you from having to do a short year LLC and C-Corporation return. I assume that the LLC is profitable?

Customer: replied 8 months ago.
the LLC will have a small profit this year.
Expert:  Mark Taylor replied 8 months ago.

Why are you converting to a C-Corporation?

Customer: replied 8 months ago.
In order to get VC funding as we are an early stage startup. We are currently a MA LLC (single member) and will convert to a Delaware C Corp. Also, what's the best way to generate a pre-seed valuation of the company to minimize tax consequences of adding shareholders after a conversion?
Expert:  Mark Taylor replied 8 months ago.

Adding shareholders would not be a taxable event. You would increase the cash and equity portion of your balance sheet. The valuation of the LLC would be based on a number of factors including the industry, sales, sales growth (to name just a few).

Expert:  Mark Taylor replied 8 months ago.

The benefit that investors would have is if they receive section 1202 treatment on their stock. Section 1202 involves sale of qualified small business stock. The gain from the sale of the stock is excluded from taxes up to a total amount of $10 million.