What Are The Benefits Associated With Conversion Of An Entity?
For many businesses exploring the possibility of converting a business entity from a C or an S corporation to a limited co. or a partnership, the following benefits are sought: business asset protection; and potential compression in the value of the business for transfer tax purposes. Under the Texas Business Organizations Act, a corporation may convert to a limited partnership or LLC. Immediately after the conversion, the limited partnership may elect under the check-the-box regulations to be treated as a corporation by filing Form 8832. If the limited partnership or LLC (converted entity) elects to be taxed as a corporation, the conversion of the corporation to a limited partnership should be deemed a tax-free reorganization, as it’s a mere change in identity, form, or place of organization of an entity. The converted entity will continue the use of the federal tax attributes of the former entity including: taxable year, employer identification number, and other tax elections.