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    6 Replies Latest reply on Jun 8, 2008 7:27 PM by vanessa1

    sole proprietor conversion

    vanessa1 Newbie
      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.
        • Re: sole proprietor conversion
          Bridge Navigator
          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).
          1 of 1 people found this helpful
          • Re: sole proprietor conversion
            Bridge Navigator
            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.
            1 of 1 people found this helpful
              • Re: sole proprietor conversion
                vanessa1 Newbie
                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.