How to Convert S Corp to C Corp

Both S Corporations and C Corporations are business entities organized as corporations. The difference between the two is that a C Corporation pays income taxes at the corporate and personal level whereas S Corporations do not pay corporate income tax. An S Corp can be converted into a C Corp by simply sending a statement of S election revocation to the IRS.

Instructions

1. Get the majority approval of all shareholders for the conversion. Income tax planning can be tricky and you'll need to have everyone on board to make this switch. Community property states will also require the approval of spouses of shareholders.

2. Draft the letter of revocation that includes the corporation's EIN, business address and signatures of all share holders. A CPA or tax attorney can help you draft this document.

3. File an 1120 tax return for the business the following year. S Corporations file 1120-S tax returns; now that your corporation is a C Corporation it will need to file a form 1120 instead.

References

• S Corporations Explained: Can I Convert an S Corporation to a C Corporation?