C Corp to S Corp Conversion
There are many reasons why a company might require machinery and equipment appraisals. It is required when a company is sold, when an insurance claim is made, or during litigation. Today we’re going to talk about another common reason that equipment valuation might be required: during a C Corp to S Corp conversion.
Why Switch Corporate Statuses?
The most common reason that a company will change from and C Corp into an S Corp is if the owner of the business wants to sell the business upon retirement, rather than simply folding the business entirely. Planning has to be done well in advance, though, as there needs to be a 10-year window between the C/S conversion before the S Corporation conversion can take full advantage of the lower taxes. If you’re going to start talking about the conversion, doing so sooner rather than later is the best plan of action.
When a business converts from a C Corporation to S Corporation, a valuation is needed for the total fair market value of the business. An analysis of total assets, tangible and intangible, is required in case there are sales of specific assets after the conversion. Companies with tangible assets — including office equipment, vehicles, construction equipment, medical machinery, dental equipment, farm implements, restaurant equipment and all other other machinery and equipment — require a separate appraisal.
Intangible parts of the business, such as company reputation and potential growth, are certainly part of a business’ value but are harder to quantify. Used machinery values, on the other hand, can have their fair market value determined by a professional appraiser.
Who Handles Machinery and Equipment Appraisals?
This is where Capital Machinery and Equipment Appraisals comes in. While a tax professional such as a CPA would initiate the conversion from a C Corp to S Corp, it is usually the responsibility of controllers, business owners, and sometimes the CPA themselves to seek out a machinery and equipment appraiser. A Certified Machinery and Equipment Appraiser (CMEA) should be sought out in order to get the most accurate valuations possible, preferably one with a great reputation.
The point of hiring an equipment appraisal service is to determine the total fair market value that is part of the business. This is important because the business most likely won’t remain static during the 10-year window between C Corp and S Corp conversion. Anything sold during that period will have to be taxed in a different fashion.
Contact Capital Machinery and Equipment Appraisals
If you’re moving from a C Corp to an S Corp, equipment values and machinery appraisals will be in your future. You should find certified professionals who are able to properly examine and attest to the true values of the equipment at hand, whether you require heavy equipment appraisal or medical equipment values. Capital Machinery and Equipment Appraisal is the team you’re looking for, so contact us as soon as you know the C Corp to an S Corp conversion is going to occur. We can handle both on-site and desktop appraisals, and we’re ready to help you.