Q: I have a MA C corp, want to reorganize as an LLC (I'm the only stockholder & employee). Can I do this simply/cheaply?
Is an LLC a "domestic other organization" so I can just file Articles of Entity Conversion of Domestic Business Corporation to a Domestic Other Entity?
If I do this will I get a new EIN?
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A:
While converting your MA C Corp to an LLC is certainly possible, the process might be more involved than you anticipate. Here's why:
Entity Conversion vs. Dissolution and Formation:
- Entity Conversion: While Massachusetts law does allow for entity conversion (as you mentioned), it's typically used for more complex reorganizations involving multiple entities. It might not be the most straightforward or cost-effective option for a single-member corporation. To answer your specific question, you are converting from a Mass Domestic Business Corporation to a Mass Domestic Other Entity.
- Dissolution and Formation: The more common approach for your situation would be to dissolve the existing C Corp and form a new LLC. This involves filing dissolution paperwork with the state, distributing the corporation's assets, and then filing articles of organization to create the LLC.
New EIN:
Yes, you will need to obtain a new EIN (Employer Identification Number) for the LLC. Even though you're the same owner, the LLC is considered a very different legal entity from the C Corp and are treated differently from the IRS's perspective. Additional information here: https://www.irs.gov/businesses/small-businesses-self-employed/do-you-need-a-new-ein
Additional Considerations:
Tax Implications: Consult with a tax professional to understand the potential tax consequences of dissolving the C Corp and forming an LLC. There might be tax implications related to the distribution of assets.
Legal and Administrative Costs: There will be filing fees associated with both the dissolution of the C Corp and the formation of the LLC. You might also want to consult with an attorney to ensure you follow all the necessary legal steps and to address any specific concerns you have.
Recommendation:
While it's technically possible to convert your C Corp to an LLC through entity conversion, the dissolution and formation approach might be a more practical and cost-effective option in your case. It's strongly recommended that you consult with both a tax professional and an attorney to guide you through the process and ensure compliance with all legal and tax requirements.
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