C to S Corporation Conversion

Are you considering C to S corporation conversion? If so, a certified equipment appraisal report assembled by Equipment Appraisal Services could serve as a valuable tool in completing a successful transition. Due to the current economic climate, specifically low values for many assets such as real estate, converting from a C Corporation to passthrough entities, such as S Corporations, is very attractive for a number of reasons. For example, C corporations are subject to double taxation, and methods of reducing corporate taxable income are for the most part limited.

With the expiration of the historically low C corporation tax rates at the end of 2012, converting a C corporation to an S corporation, or passthrough entity, is becoming increasingly attractive given the historically low income tax rates on distributions to individuals. For example, rather than be taxed at both the corporate and individual levels for earned income in a C corporation, business owners can elect a C to S corporation conversion, and without tax consequences avoid double taxation. For domestic firms with less than 100 like shareholders, that are not conducting business in financial or insurance related fields, qualifies for a C to S corporation conversion.

In order to take reap the rewards of the tax benefits from a C to S corporation conversion, business owners need to be aware of built in gains that may arise from the conversion, which in theory could serve to negate part or all of the initial tax savings benefit. For example, if certain assets were over-valued during the conversion, the higher value would shift to the S corporation, or passthrough entity, unintentionally passing on taxable gains. If non-cash property is involved, obtaining a certified equipment appraisal report can help you avoid this.

If you are considering a C to S corporation conversion, please contact Equipment Appraisal Services today for more information regarding how a certified equipment appraisal report, assembled by one of our qualified appraisers, can help with the conversion process.