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The right entity choice: Should you convert from a C to an S corporation?

Posted by Admin Posted on Dec 29 2020

The best choice of entity can affect your business in several ways, including the amount of your tax bill. Although S corporations can provide substantial tax advantages over C corporations in some cases, there are potential tax problems to assess before deciding to convert from C to S status. One issue to consider is last-in, first-out (LIFO) inventory. A C corporation that uses LIFO inventory must pay tax on the benefits it derived by using LIFO if it converts to an S corporation. Other issues to consider are the built-in gains tax, passive income tax and unused net operating losses. Contact us if you’re interested in an entity change. We’ll explain your options and the tax implications.