Changing The Status Of Entities
Organizations that are eligible and wish to change their classification may do so by filing an election. Once the classification has changed, the organization must keep that classification for at least five years.
Potential Tax Impact on Changing Classification
A change in tax classification will have tax consequences.
Corporation Status Elected
When a partnership elects to be classified as a corporation, it will be considered to have contributed all of its assets and liabilities to the corporation in exchange for stock in the corporation. 23 The partnership is deemed to liquidate by distributing stock in the corporation to its partners.