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C-Corp to S-Corp Pros & Cons

Hello,

Small dental office C-Corp advised by accountant 14 years ago for NOL. Currently operating part-time with spouse & myself as W-2 employee. Equipments fully-depreciated, no more carryover NOL, brand new SBA-EIDL loan (started paying July 2024 due to 2-yr deferred payments).  Does it make sense to convert to S-Corp (LLC?) and do I need to make a new QB business account? 

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1 Reply
evelynm
Employee Tax Expert

C-Corp to S-Corp Pros & Cons

Converting to an S-corporation may have some other implications.   Built-in gains tax. Businesses that convert from a C corporation to an S corporation might owe the built-in gains tax. This tax is imposed if the S-corp sells assets within five years of the conversion that had increased in value while it was a C corporation. The tax is calculated on the increased value that was "built-in" at the time of the conversion.   Although you mentioned fully depreciated assets if you sell your practice there could be tax implications.

 

The main advantage of pass-through taxation is that the business itself generally isn’t subject to federal income tax. This helps avoid the “double taxation” commonly associated with C corporations, where income is taxed at both the corporate level and again at the shareholder level when dividends are distributed.  I do recommend you consult with legal before making any determination.  Here are further details:   S Corp Taxes 

 

Information regarding Quickbooks and further details here:   how-to-start-an-s-corp 

 

 

Have an amazing day. Evelyn M (CPA 20+ years)
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