We have a small 8 person company that started out as a two person LLC, but we had to convert to a C corp to take an investment. As the LLC, we received a government SBIR grant, so we couldn't shut down the LLC entity, we had to make it become part of the C corp.
At the time of conversion, we had 5 employees and there was money in the LLC. Those funds were moved into the C corp, but now the accountants are telling me that me and my partner have to pay taxes on the LLC money that was transferred.
I'd understand that if it were a distribution, but it was not. It wasn't even a virtual distribution because there are others in the C corp.
Has anyone ever dealt with anything like this before?
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