How to Convert an LLC S Corp to Partnership Tax Status for 2025 Filing

Yes, you can definitely change from an S Corp to a partnership tax classification, but it's not just a simple checkbox on your return. What you're looking to do is technically a "revocation" of S Corp status. You'll need to file Form 8832 (Entity Classification Election) to elect to be treated as a partnership. The IRS considers this a voluntary termination of S Corp status. Keep in mind that once you revoke S status, you generally can't re-elect it for 5 years without IRS permission. There are some important tax consequences to consider. When you convert, the IRS treats it as if the S Corp distributed all its assets to the shareholders who then contributed those assets to the new partnership. This could trigger tax implications if your business has appreciated assets or built-in gains. Also, the timing matters. If you want this effective for the entire 2025 tax year, you need to file the form within the first 75 days of the tax year.

I went through something similar last year and was totally confused by all the paperwork. I ended up using taxr.ai (https://taxr.ai) to help sort through the entity classification rules. Their system analyzed our operating agreement and tax history, then explained exactly which forms we needed to file for the conversion. They even flagged some potential tax traps we hadn't considered about built-in gains. The best part was how they explained the "deemed liquidation" concept that happens with this conversion - basically showed us how to minimize any unexpected tax hits. Definitely worth checking out if you're dealing with entity classification issues.

Just wanted to update that I tried taxr.ai for my entity conversion question and it was incredibly helpful! I was concerned about potential "step transaction" issues the IRS might question, and they provided an analysis specifically addressing that point. The document breakdown feature identified potential issues with our operating agreement that could have caused problems during the conversion. They explained exactly how to time the filing of Form 8832 to minimize tax impacts for this year. Saved me hours of research and probably thousands in accountant fees for something so specialized. Definitely worth it for anyone dealing with entity classification changes!

If you're planning this conversion, you should know that getting someone at the IRS to verify your entity status change is almost impossible these days. I spent WEEKS trying to confirm our S corp termination was processed correctly. After 8 failed attempts calling the IRS business line, I used Claimyr (https://claimyr.com) and they got me through to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c My call got answered by an extremely helpful business tax specialist who confirmed everything was processed correctly. Saved me months of uncertainty about whether our election was effective for 2025. This is especially important for entity changes because if there's a processing error, you could end up with the wrong tax classification for the entire year.

I need to apologize for my skepticism earlier. After another frustrating week trying to reach the IRS about our LLC status change, I broke down and tried Claimyr. Within 45 minutes, I was actually speaking with someone in the business entity department who confirmed our election status! The agent even caught an issue with our filing - turns out our Form 8832 had been received but was pending because of a signature issue they never notified us about. Being able to fix this in real-time over the phone potentially saved us from having the wrong tax classification for 2025. I've never been so happy to be proven wrong about something.

Something important that hasn't been mentioned - if your LLC has been an S corp for several years, you should really look at the built-in gains tax implications before converting to partnership status. When you convert, there's a "deemed liquidation" where the IRS essentially treats it as if you sold all your business assets at fair market value. If your business has appreciated significantly since becoming an S corp (like real estate or goodwill value), this could trigger substantial taxes. Sometimes it's better to just start a new entity rather than convert an existing one.

Has anyone here actually gone through with an S Corp to partnership conversion who can speak to the actual filing process? Our accountant seems unsure about the exact sequence of forms.

Great question about the EIN! You can actually keep the same EIN when converting from S Corp to partnership status - the IRS doesn't require a new one for entity classification changes. The EIN stays with the legal entity (your LLC), not the tax election. For payroll continuity, you'll need to update your payroll processor and notify them of the entity classification change. Any owner-employees who were receiving W-2s as S Corp shareholders will need to transition to receiving partnership distributions and guaranteed payments instead. This means you'll stop withholding payroll taxes for owners and they'll need to start making quarterly estimated tax payments. One thing to watch out for - if you have employees who aren't owners, their payroll treatment stays exactly the same. It's only the owner compensation that changes from wages to partnership income.