Should I Convert My S Corporation to an LLC?

It’s very popular for business owners to operate under the structure of an S corporation. This allows business owners to generally avoid “double taxation” that could impact owners of C corporations. Operating as an S corp may help a business owner avoid self-employment taxes typically affecting LLCs that choose to be taxed as partnerships.

Even though dividends from S corps are not calculated in terms of self-employment taxes and provide more income tax benefits for this reason, they don’t provide the kind of asset protection that a business owner might prefer. 

Stock linked to C corps and S corps can be exposed to risk in the form of judgment creditors. If there are major assets inside your S corp, there may be benefits to converting to an LLC to protect them. Whereas an S corp has stockholders, an LLC is limited to members. So long as the LLC documents are drafted in the right way and you have more than one member, a judgment creditor should not be able to access assets inside the company.