While you formed as an LLC under state law, when you made the election to be an S corporation, you were informing the IRS that you wanted to be treated as an association and taxed as an S corporation (an entity type other than the default classification).
As a result, you are required to follow the laws that are application to S corporations; federal and state income tax only.
Some items to consider here:
- Hopefully you have been maintaining a basis schedule as you will need this when determining the tax implications of the liquidating distribution
- If you distribute any property as part of the liquidating distribution, this is treated as if you sold the property at FMV. The gain or loss is recognized at the S corp level and reflected accordingly.
- Your liquidating distribution needs to be reported on a form 1099-DIV and not the K-1.
- This entity has always been an LLC for state law purposes (not state income tax).
- There are a number of complexities, and as such, I would recommend consulting with a tax professional to get some guidance
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
