Converting a C Corporation into an LLC: Quantifying the Tax Costs and Benefits
Journal of Taxation, Volume 113, Number 02, August 2010
15 Pages Posted: 5 Dec 2013
Date Written: August 1, 2010
The authors develop a spreadsheet model that evaluates the interplay of the present and future tax costs and benefits associated with the conversion of a C corporation to an LLC. The model discloses few situations where the conversion election is the better choice within a time value of money framework. This is true even when assuming that dividends are taxed at ordinary income rates.
Keywords: LLC, C corporation, choice of tax entity, time value of money
JEL Classification: K34, H21, E62, H25
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