Changing From Sole Proprietorship To Corp/S Corp, LLC

 
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Old 09-29-2008, 09:35 PM   #1
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Changing From Sole Proprietorship To Corp/S Corp, LLC


Yes, I know this a question for my accountant, I will call when he wakes up tomorrow, but in the mean time....


Is it possible to Change from Sole Proprietorship to Corp/S Corp, LLC ? Possible during the transfer , change/add owners?

Or do I have to basically scrap the Sole and start new? What will happen to my Liability Insurance? and my WC? Can they be transfered? What about my license for other counties? We currently carry 3 different licenses for 3 different work areas, can they can transfered?


Or Would it be easier to start from scratch? Basically, I want the business to my in my name, essentially in the future, I will have to run it. but as of now, i legally dont own it. (dad does)
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Old 09-29-2008, 10:11 PM   #2
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Re: Changing From Sole Proprietorship To Corp/S Corp, LLC


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Old 09-29-2008, 10:16 PM   #3
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Re: Changing From Sole Proprietorship To Corp/S Corp, LLC


No it's not possible to change from a sole prop to a s-corp.

A sole prop has no legal entity so there is nothing to convert. You will be starting over in legal structure.
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Old 09-29-2008, 10:27 PM   #4
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Re: Changing From Sole Proprietorship To Corp/S Corp, LLC


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I do know that we set up the LLC in Delaware, even though we don't all live there or all the entities. It is legal, many companies do, because of friendly tax laws.
I see a lot of companies that are going to go public use Delaware as the place to set up an LLC. I am not sure about your sole P though
And here I thought setting up a Delaware Corporation was all about having favorable laws in a lawsuit situation.

Does favorable Tax Laws in Delaware affect what your tax responsibilities are when conducting business in another state?
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Old 09-29-2008, 10:36 PM   #5
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Re: Changing From Sole Proprietorship To Corp/S Corp, LLC


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Old 09-30-2008, 06:02 PM   #6
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Re: Changing From Sole Proprietorship To Corp/S Corp, LLC


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Originally Posted by Mike Finley View Post
No it's not possible to change from a sole prop to a s-corp.

A sole prop has no legal entity so there is nothing to convert. You will be starting over in legal structure.
so are you saying nothing is transferable? I'll have to take all test again for my licenses?
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Old 09-30-2008, 06:13 PM   #7
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Re: Changing From Sole Proprietorship To Corp/S Corp, LLC


My state required me to apply for a new license when I changed from sole to corp. Check your state. I wish I had known then!
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Old 09-30-2008, 06:21 PM   #8
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Re: Changing From Sole Proprietorship To Corp/S Corp, LLC


I can't help with the license question, although I think your new LLC or S corp can use you as the license holder.

But when you change from a sole prop, it merely ceases to take on new business and your new configuration starts as a fresh startup. You will personally continue to be held liable for everything completed under your sole prop.

When I switched over I completed all jobs in progress as sole prop. All new contracts were then written under the new LLC. Essentially I went out of business (sole prop) and started fresh (LLC) on the next contract.

Your insurance does not transfer to the new entity and you will have to obtain new policies.

Hope that helps.

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Old 09-30-2008, 07:06 PM   #9
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Re: Changing From Sole Proprietorship To Corp/S Corp, LLC


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so are you saying nothing is transferable? I'll have to take all test again for my licenses?
Unless your state is very different then mine licensing is always held by an individual not a company, so your licenses should transfer fine no matter what. You'll probably be an employee of your new company I would hope.

The easiest thing to do in those cases is just give them a some sort of name change letter on your old company letter head. I wouldn't go into too much detail, just this is to notify you that we are changing the name of the company to whatever it is.

I'm not even going to go into how ridiculous it is to register your corporation in Delware or Nevada or any of that crap. We've gone over that a million times, anybody interested can do a search and read through the last moron who argued the virtues of it for 3 weeks, and you can judge for yourself why it's a waste of time. Register in your state that you work in.

Last edited by Mike Finley; 09-30-2008 at 07:08 PM.
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Old 09-30-2008, 07:09 PM   #10
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Re: Changing From Sole Proprietorship To Corp/S Corp, LLC


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Originally Posted by Mike Finley View Post
Unless your state is very different then mine licensing is always held by an individual not a company, so your licenses should transfer fine no matter what. You'll probably be an employee of your new company I would hope.

The easiest thing to do in those cases is just give them a some sort of name change letter on your old company letter head. I wouldn't go into too much detail, just this is to notify you that we are changing the name of the company to whatever it is.
I agree on this one. I simply changed from R&B's Remodeling to R&B's Remodeling Inc when I changed the structure and got new tax filing documents from the licensing office which also houses the corporate tax office where I am at.

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