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Does state of Illinois allow conversion from LLC to Corportion


If one has a single member LLC in Illinois and needs to become a C corporation to take an investment, is it advised to convert to a C corporation or to create a C corporation and dissolve the LLC?

 

Does Illinois allow an entity conversion from corporation to convert an LLC or vice versa?

 

Yes, the IL Secretary of state allows the conversion from one structure to another, such as corporation to an LLC or LLC to a corporation.

 

One has the following options to treat an LLC a corporation:

 

Option-1:

 

Convert, LLC to a C Corporation for the tax purpose:

In this option, a request is sent to the Internal Revenue Service to file taxes as a C Corporation and the LLC structure does not change in this option.

 

This option is generally used to pay salaries to the LLC members, because a member of an LLC is not allowed to withdraw payroll.

 

Option-2:

 

Convert, LLC structure to a C Corporation:

 

Not every state of the USA allows a conversion from an LLC to a corporation or vice versa. Secretary of state determines if the statue allows the conversion.

 

In this option a new employer identification is obtained from the Internal Revenue Service and an LLC absorbs in a C Corporation.

This method is generally used for the tax benefits and making investments under a corporation instead of an LLC though the investment can also be done under an LLC.

 

Option-3:

 

Open a new Illinois C Corporation and dissolve Illinois LLC.



Does state of Illinois allow conversion from LLC to Corportion


If one has a single member LLC in Illinois and needs to become a C corporation to take an investment, is it advised to convert to a C corporation or to create a C corporation and dissolve the LLC?

 

Does Illinois allow an entity conversion from corporation to convert an LLC or vice versa?

 

Yes, the IL Secretary of state allows the conversion from one structure to another, such as corporation to an LLC or LLC to a corporation.

 

One has the following options to treat an LLC a corporation:

 

Option-1:

 

Convert, LLC to a C Corporation for the tax purpose:

In this option, a request is sent to the Internal Revenue Service to file taxes as a C Corporation and the LLC structure does not change in this option.

 

This option is generally used to pay salaries to the LLC members, because a member of an LLC is not allowed to withdraw payroll.

 

Option-2:

 

Convert, LLC structure to a C Corporation:

 

Not every state of the USA allows a conversion from an LLC to a corporation or vice versa. Secretary of state determines if the statue allows the conversion.

 

In this option a new employer identification is obtained from the Internal Revenue Service and an LLC absorbs in a C Corporation.

This method is generally used for the tax benefits and making investments under a corporation instead of an LLC though the investment can also be done under an LLC.

 

Option-3:

 

Open a new Illinois C Corporation and dissolve Illinois LLC.



How does an LLC tax based on the income or money deposited in the bank


Is it both members of an LLC that will pay the individual tax or will it be based on the amount of money paid into an LLC bank account?

 

The LLC members are taxed on the income which is either pass to the owner through K1 if it is not a disregarded entity otherwise it is reported directly to the schedule C, E or according to the business activity.

 

Paying taxes based on depositing money in the bank amount is irrelevant because it can a mixture of investment, loans, salary or others.

Additional tips for an LLC member:

 

Salary is not allowed to an LLC, member unless file an election to the IRS to treat the LLC as a corporation or an S corporation for the tax purpose only.

 

Disregarded LLC files income on the Form 1040 whereas as multi-member LLC files Form 1065.

Most of the banks ask the operating agreement of the registered LLC to open a bank account.



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How does an LLC tax based on the income or money deposited in the bank


Is it both members of an LLC that will pay the individual tax or will it be based on the amount of money paid into an LLC bank account?

 

The LLC members are taxed on the income which is either pass to the owner through K1 if it is not a disregarded entity otherwise it is reported directly to the schedule C, E or according to the business activity.

 

Paying taxes based on depositing money in the bank amount is irrelevant because it can a mixture of investment, loans, salary or others.

Additional tips for an LLC member:

 

Salary is not allowed to an LLC, member unless file an election to the IRS to treat the LLC as a corporation or an S corporation for the tax purpose only.

 

Disregarded LLC files income on the Form 1040 whereas as multi-member LLC files Form 1065.

Most of the banks ask the operating agreement of the registered LLC to open a bank account.



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