Switching from a partnership to an LLC
I started my company as a General Partnership - partly to avoid fees while still ramping up, and partly because I wasn't foreseeing large revenue in the intial year.
Time went by, and now I need to switch to an LLC, due to tax, liability and presentation issues.
Will I need to dissolve my partnership and open a new S-Corp, or is there a way to retain my EIN, name, registration etc. and just "roll-over" to an S-Corp?
Bonus question: Is it something I can do on my own (online), or is it better to involve my accountant?
Thanks in advance,
Guy
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Do you want an LLC or an S Corp? They are different. – Tim J 14 years ago
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@Tim actually, very good question. I have no idea yet. Does it make a difference to the answer? What would you recommend? – Traveling Tech Guy 14 years ago
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What does the company do? Does it own property? You should talk to an accountant for the choices. I went with S corps for my businesses - for a few reasons. Any web site that compares them will be useful to you. I wanted to be able to "convert" to a C corp easily in the future (mostly for issuing different stock classes) – Tim J 14 years ago
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It's a consulting company. No property, no stocks. Will talk to my accountant next week. – Traveling Tech Guy 14 years ago
2 Answers
Doing it online is not doing it on your own. Check with your State for the procedures involved in changing the business classification. It is mainly taxes that can complicate the issue, otherwise as long as you file the right forms and pay the fees nobody would care. However, if still uncertain, consult a business attorney -- not an accountant.
Best of luck!
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Thanks! What resources would you recommend I start reading, and why a lawyer, if it's a single employee entity? I thought a lawyer is needed when partnership/equity issues are at stake. – Traveling Tech Guy 14 years ago
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I assumed that the reason for forming LLC is to limit liability. If indeed there is a liability exposure, consulting a lawyer could be a good investment as it will help you explore the liability from all angles, perhaps even some that are not quite obvious at the moment. Since you are about to form a new business entity, it is a good idea to lay a proper foundation. – Usabilitest 14 years ago
Your best way forward would be to start fresh to avoid any confusion between the partnership and the LLC.
What I would do is setup the LLC and have it purchase all the rights to the partnership. That way, there is a clean transaction.
You can checkout www.nolo.com for an on-line way to form an LLC or S-Corp. I have used them and it worked out well for me.
Good luck
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Thanks Jarie! Now all that remains is to sell my company to myself. Hope I'll get along with my new boss :) – Traveling Tech Guy 14 years ago
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Let's hope so. I hear he's a pretty good guy! – Jarie Bolander 14 years ago
