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:
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.
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.
Open a new Illinois C Corporation and dissolve Illinois LLC.