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I am looking to convert my LLC to a C Corporation. I wanted

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to know if it's better...
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: 12 months ago.Category: Tax
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11/22/2016
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 12 months ago
Mark Taylor
Mark Taylor, Certified Public Accountant (CPA)
Category: Tax
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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?

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Customer reply replied 12 months ago
the LLC will have a small profit this year.
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 12 months ago

Why are you converting to a C-Corporation?

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Customer reply replied 12 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?
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 12 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).

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Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 12 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.

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Mark Taylor
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