Entity Conversion

Entity conversion occurs when a business entity decides to convert to a different type of entity, such as a C corporation becoming a limited liability company (LLC). When transitioning from one type of legal structure to another, companies must undergo a tax obligation.

The Purpose

A company often makes the decision to convert from a C corporation to an LLC to take advantage of specific tax benefits. When the conversion takes place, the corporation and shareholders must pay federal income tax on all respective gains, which requires a business valuation.

Trigger Events

• Integrate new shareholders
• Incorporate new investors
• Tax purposes

Scalar’s Services

The IRS prefers an independent third-party valuation firm like Scalar to determine the fair market value of the company’s assets at the time of conversion. Scalar’s highly-qualified valuation specialists have performed thousands of business valuations using the most suitable methodologies to obtain the most accurate valuation possible.