A general partnership can convert to either limited liability partnership or limited liability company status with no federal income tax liability; conversion of a C corporation to a partnership, however, would result in tax on any built- in gains.

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A general partnership can convert to a limited liability partnership (LLP) or limited liability company (LLC) without incurring federal income tax liability because these entities are generally treated as pass-through entities for tax purposes, allowing income to be taxed at the individual level rather than at the entity level. However, converting a C corporation into a partnership triggers a tax on any built-in gains because the assets are considered to be sold at fair market value, leading to a taxable event under federal tax laws.

A General Partnership Can Convert to Either Limited Liability Partnership