Part 3/6:
Before initiating the conversion process, ensure your business qualifies under IRS rules:
Fewer than 100 shareholders. An S corporation cannot have more than 100 owners.
Domestic company. The business must be incorporated or organized under U.S. state law.
Shareholder restrictions. The corporation cannot have non-resident alien members.
Ownership limitations. Shareholders must be U.S. citizens or residents, and none of the members can be other business entities except for certain non-profit organizations, such as those classified under sections 401(a) or 501(c)(3) of the tax code.
If your LLC meets these criteria, you're ready to proceed with the conversion.