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The Cost of Converting from a C to S Corporation

By March 22, 2016 No Comments

When choosing the right business structure, it is important to understand and weigh the pros and cons of your different options. There are many different factors to be aware of that could be costly if they are overlooked.

Keith Sellers and John Tripp, in a recent article published in the Journal of Accountancy, discuss in detail a costly consequence of converting your business from a C to S Corporation. The premise of the article discusses how, if a business owner plans to gift all or part of their business’s stock, the appraised fair market value (FMV) could increase by 50% or more if converted to an S-Corp. This being true, it is important for shareholders, if considering making a gift of stocks, to obtain an appraisal of their C-Corp and make the gift(s) before making an S-Corp election.

While there are certainly positives about changing from a C to S Corporation, this is one consequence that a business owner may not be aware of.

To read the full referenced article, click here. For assistance in business valuations or deciding on/changing a business structure, contact Thomas Vereecke, CPA, CVA (616) 608-8510 or

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