QUESTION DETAIL
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We currently own a C corporation in TN with one shareholder. I want to convert to a two-member LLC. TN allows for a simple conversion, while retaining my original corp name and entity. My intent is to be an LLC as a legal entity, with an "S" status for federal tax purposes. I understand the tax implications of the conversion. I want the pass-thru federal taxation (via a K-1) versus the double-taxation of the "C". I don't want to be a disregarded entity, hence going from one shareholder to two (this is my wife’s biz so I’d become the 2nd member). I understand the 10 year tail on "C" to "S" if I sell prior to 10 years. I want the liability protection of an LLC, specifically the charging order protection (although not totally bullet-proof, still better than as "C"). I don't want the chance of losing an portion of ownership shares if I’m sued personally. Will the IRS allow the same thing or would the LLC become a new entity with a new EIN number? Want to convert and retain the original name (except for the LLC replacing INC) and retain the same EIN number.
ANSWER
The BIDaWIZ Team's Answer:
Typically, when you convert from a C Corporation to an LLC, you are creating a new charter with the State and thus a new EIN is required. However, TN allows C Corporations to convert to an LLC pursuant to TN Code Section 48-21-111 which is deemed to be for all purposes the same entity that existed before the conversion. In addition, the IRS states per publication 1635 that if you filed to be taxed as an S Corporation with form 2553, you will not need a new EIN. Please note that Tennessee doesn't recognize S Corporations for state tax purposes and thus treats them as C Corporations so you will owe additional taxes. In summary, we do not believe that you will need to obtain a new EIN.
