LLC’s-Current Hot Topics

The Journal of Taxation is a respected and leading tax monthly  publication. In the August 2010 publication, a lead article is “Converting a C Corporation into an LLC: Quantifying the Tax Costs and Benefits, ” by John O. Everett, Cherie J. Hennig and William A. Raabe. In essence, the article concludes that although asset prices are lower now than for some time and the cost to liquidate is lower than before the tax cost still exceeds the future tax benefits. It states that this upfront cost outweighs the long term tax savings. It provides many examples in spreadsheet format. What this means is that the initial choice of a C corporation is problematic since there is a tax penalty at exit. Thus the initial choice of entity is crucial. As discussed elsewhere in this blog, an LLC is a flexible entity which most easily permits shifting from one form to another.

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