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6 Replies Last post: Jun 8, 2008 7:27 PM by vanessa1

sole proprietor conversion

Jun 7, 2008 6:28 PM

Click to view vanessa1's profile Professional vanessa1 4 posts since
Jun 7, 2008
Please offer any advice on converting my sole proprietor's status to either a LLC or Corp. (C or S).
I'm in a home-based business....after school childcare. I like the idea of limited liability, and I know they both offer that. Not sure from a tax basis, which one would put me in a better tax position. Also, not sure how I could access all of my money, in the checking account, if I needed it or wanted it if I elected Corp. status without it violating my bylaws and regulations. I know about paying yourself a salary, but like my current status (sole p.), I use my money as I need when I need it or want it.

I'm reading as much as I can on this subject and I have already reserved my name...it will be the same name as my sole proprietor's business plus the LLC or Corp at the end. Just want to hear some other points of views before I make a decision.....thanks.
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Click to view Bridge's profile Mogul Bridge 359 posts since
Jun 3, 2008
1. Re: sole proprietor conversion Jun 7, 2008 7:14 PM
You will need to:

1) Get an EIN (employee identificayion number) from the IRS
2) Register as an S corp or LLC in your state
3) Open a business checking account in your company name with your EIN

S corp and LLC are very similar (read many posts of the subject here)

Since it is your company, you can access you money whenever you want. If you chose to be an LLC, you will still be taxed as a sole prop. unless you elect to be taxed as an S corp (again see other posts on subject).
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Click to view vanessa1's profile Professional vanessa1 4 posts since
Jun 7, 2008
2. Re: sole proprietor conversion Jun 7, 2008 8:09 PM
in response to: Bridge
Hey, thanks for the comments. I already have an EIN number and a checking account in the business name, I'll just have to add the LLC or Corp. part. Now, I understand the part on the money. But, if I elect an LLC with request to be treated as an S-Corp with taxes.....why wouldn't I just go and register as a Corp?
Thanks again for your thoughts.....they were very helpful.
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Click to view Bridge's profile Mogul Bridge 359 posts since
Jun 3, 2008
3. Re: sole proprietor conversion Jun 7, 2008 11:03 PM
First, make sure your EIN is in your legal company name (new structue)

Several things to consider on LLC versus S copr.

LLC's distribute funds to "members" based on the controlling Operating Agreement, S corps. distribute frunds to shareholders based on ownership/contributions. For a 1 owner/member ther is no difference but that could change as your company grows.

States have different filing fees for S copr./LLC some states there is a big enough difference to choose one or the other.

A good accountant can help you with other issues to consider.

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Click to view Lighthouse24's profile Mogul Lighthouse24 2,396 posts since
Oct 10, 2007
4. Re: sole proprietor conversion Jun 8, 2008 3:37 PM
in response to: vanessa1

Vanessa1, here's a link to one of the postings/articles that Bridge referred to (one of the better ones at explaining the differences you asked about). Hope it helps. Best wishes.

http://www.bizfilings.com/products/articl
es/llcs_vs_s_corps.asp
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Click to view vanessa1's profile Professional vanessa1 4 posts since
Jun 7, 2008
5. Re: sole proprietor conversion Jun 8, 2008 7:19 PM
in response to: Lighthouse24
Hey Lighthouse!! great website.....thanks a bunch! I've actually been in business for 23 years...but I now know that I need more protection. I'm a "one" person show.....I may branch out into a commercial setting....but not immediately. I could probably go either way.....LLC or Corp. I truly appreciate the willingness of everyone to share a bit of their knowledge to help a "stranger" along.....thank you all.
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Click to view vanessa1's profile Professional vanessa1 4 posts since
Jun 7, 2008
6. Re: sole proprietor conversion Jun 8, 2008 7:27 PM
in response to: Bridge
Bridge......you are smart! So I will have to check into the EIN number......my business name will remain the same, but I'll either be a LLC or Corp....it's looking like I could just about make either one work for me. I'm a one-person show.....have been for the last 23 years. I was looking into branching out, but had to put plans on hold to be a caregiver for my dad.....that job lasted for 5 1/2 years and he died a year ago. So, I'm just beginning to come up for air and start thinking about me and my future plans. And with all the help I'm receiving....I know that I'm on the right track. Your advice has been very helpful. Thanks.
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