Splitting up LLC taxed as an S-Corp

A California LLC taxed as an S-Corp conducts two separate business activities. The owners want to separate these into separate entities. No change of ownership.

What are the steps? Does something need to be filed with CA Secretary of State?

I am wondering if this is structured like an F reorganization. Existing LLC creates a sub LLC. Transfers one of the businesses into the sub. Then, distributes the ownership of the sub LLC to the owners of the LLC.

It's that last step that has me concerned. We (me and the atty) need to make sure this distribution of "corporate" assets is not taxable.

I know this is doable in a corporate setting. You file corporate reorganization paperwork with the SOS. But, according to the SOS, this entity is an LLC.

FTB follows 355. https://www.ftb.ca.gov/tax-pros/law/chi ... 2008-1.pdf

No idea what Secy of State requires.

If the businesses are at least five years old, then there are no 355 issues. Your plan is correct.

I know this is doable in a corporate setting. You file corporate reorganization paperwork with the SOS. But, according to the SOS, this entity is an LLC.

If a CA LLC has elected to be taxed as an S corporation doesn’t CA treat it as an S corp? Doesn’t the entity file Form 100S with the FTB? I would think that this entity is functioning under a corporate setting.

There is a reorg for this...C ? G? I recall digging it up years ago when two brothers wanted to separate. Never did...but it can be done.

It's 355.

Sometimes 368(a)(1)(D). See 355(a)(2)(C).