What's the key difference between Single Member LLC taxed as C Corporation vs converting LLC to C Corp?

This is helpful info, but I'm still confused about something - if I keep the LLC but elect to be taxed as a C Corp, do I still need to do things like holding annual meetings and keeping corporate minutes? Also, would I need to issue stock certificates or can I remain the sole owner in both scenarios?

You've touched on important distinctions. When you're just electing C Corp tax treatment for your LLC, you don't need to follow corporate formalities like annual meetings or keeping minutes - you just follow the tax rules for C Corps while maintaining LLC operational simplicity. Regarding ownership, with the tax election approach, you remain the sole member of your LLC with no need to issue stock. When actually converting to a C Corporation, you would need to issue stock certificates, which opens up the possibility of bringing on shareholders, though you could still be the sole shareholder initially.

Does this tool actually look at your specific state's requirements? I've heard that some states have different rules or fees for LLCs taxed as C corps vs actual C corps.

I'm a bit skeptical about these online tax tools. How accurate is it really? Did you have your accountant verify the recommendations? $7,800 sounds like a lot of savings.

Yes, the tool does consider state-specific requirements and fees. When you input your business location, it adjusts its analysis to include state-level considerations. For example, it showed me that in my state, the annual LLC fee was $450 less than what I'd pay as a full C Corp. I actually did have my accountant review the report, and she was impressed with the accuracy. The $7,800 savings came primarily from the way my business income was structured - I was able to take advantage of certain fringe benefits and retain some earnings at the lower corporate tax brackets. My accountant ended up implementing most of the recommendations.

How exactly does this work? Doesn't the IRS just hang up if it's not you calling directly? And do they actually explain the tax implications or just tell you if forms were filed correctly?

This sounds like a scam to me. Why would I pay someone else to wait on hold when I can just do that myself? And how do they get around the IRS verification questions? I doubt they can actually do what they claim.

It's not like someone else is pretending to be you - the service literally just holds your place in the queue. When an agent picks up, you get a call connecting you directly to that agent. You're the one who speaks with the IRS and answers all verification questions. The IRS agents I spoke with were surprisingly helpful about the implications. The agent walked me through the different tax forms I'd need for my newly elected C Corp status, explained how to handle the transition period, and even pointed out some common mistakes to avoid. Having direct answers from the source was much better than interpreting contradictory info from online forums.

Do you know if there's an income threshold where the C Corp structure becomes more beneficial than the pass-through with QBI deduction? I've heard different things about this.

Yes, there is definitely an income threshold where the benefits can flip. In my experience, pass-through taxation with the QBI deduction tends to be more advantageous for businesses making under $315,000 (for married filing jointly) or $157,500 (single filers). Once you start exceeding those thresholds, especially if you're planning to retain significant earnings in the business to reinvest rather than taking them as personal income, the C Corp structure often becomes more beneficial. The corporate tax rate of 21% can be lower than your personal rate, and you can time distributions strategically.

Your lawyer is right. When you convert from an LLC to a C Corp, the IRS treats it as if you sold all your LLC assets to the new corporation. If your business assets have appreciated in value, you could face a tax bill on that "phantom gain" even though no actual sale occurred. The tax election approach (keeping LLC structure but being taxed as a C Corp) can avoid this issue since there's no deemed liquidation. It's one of the major advantages of the election route versus formal conversion.

Great questions! I made the C Corp tax election for my LLC two years ago, so I can share my experience with the quarterly payments and timing. For quarterly payments, you'll switch to making corporate estimated payments (Form 1120ES) instead of the personal estimated payments you were making as an LLC. This actually eliminated my self-employment tax burden, which was a nice benefit. The corporate payments are based on your business income, and then you'll pay personal income tax on any salary you take from the business. Regarding timing, you generally need to file Form 8832 within 75 days of when you want the election to take effect. If you want it effective for the current tax year, you need to make the election by March 15th (75 days after January 1st). However, there's also a late election relief provision that might apply in certain situations. I'd definitely recommend running the numbers first - the tools mentioned earlier in this thread like taxr.ai could help you see the actual impact before making the switch. The quarterly payment structure was actually simpler for me to manage than the old SE tax system.