In past years, shareholders could convert from a C to an S corporation in anticipation of realizing large gains on the sale of assets or the sale of the business itself. If you're operating as a C corporation and wish to elect S status, the election must be made no later than two and a half months after the beginning of the year to be effective. For calendar year businesses, this date is March 15. Operating as a Limited Liability Company California recently signed into law legislation allowing limited liability companies. This is a hybrid entity which combines the limited liability of a corporation and the single level of tax on a basis similar to that of a partnership.
Income is taxed to nonresidents based on the allocation and apportionment of worldwide income.
There is no limit to the number of members in an LLC and foreign, as well as corporate, members are allowed. Existing partnerships can usually convert to an LLC structure without adverse tax consequences. Nearly all the states have adopted LLC legislation. However, there remains the lack of uniformity regarding the rules from state to state. This may create some concern for businesses operating in several states.