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JerrySJD
JerrySJD, Attorney
Category: Business Law
Satisfied Customers: 821
Experience:  Attorney for business formation, business sales, tax, partnerships, sole proprietors and buy/sell agreements.
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if I have a S corp that does computer service business and

Resolved Question:

if I have a S corp that does computer service business and soon I will not do that business anymore but more of real estate investment, which I am forming a LLC for that. how do I end the S corp I have?
Submitted: 4 years ago.
Category: Business Law
Expert:  JerrySJD replied 4 years ago.

JerrySJD :

You need not file a dissoution with the state. Have you considered using the sub-S to do the real estate business? They are both pass-thrus. The sub-S has different procedures, but in a way the formality of a sub-S is good as you will have records of your significant transactions in the minutebook.

JerrySJD :

Filing the dissolution is a simple form and will stop your annual filing requirments.

JerrySJD :

You will need a shareholder vote (if it is just you then consent minutes will do). You also need a Tax Clearance Certificate. Then you can file the Articles of Dissolution.

Customer:

what? so are you suggesting I am not forming a LLC?

Customer:

never mind sorry this is a diff question.. yes

Customer:

ok so you are saying to keep my S corp even though it is for diff business

Customer:

but using a sub-D to do business

Customer:

but if I do that and someone sues me later for my properties will that not affect my other S corp?

Customer:

or will it be cleaner to just disolve my S corp later and create a LLC

Customer:

the reason is I still want to do the business using my S corp for the computer service

Customer:

but LLC for the real estate is completely different and I will have different partners.

Customer:

does it make sense?

JerrySJD :


  • If there are liabilities associated with the sub-S, or potential liabilities, then yes. The introduction of different partners means yes - a new LLC. Much simpler.


  • Customer:

    ok yah ty

    Customer:

    should I form the LLC myself or use a lawyer?

    Customer:

    I did my S corp myself 12-13 years ago

    Customer:

    it was diff time then I had to go there physically and look for the names

    Customer:

    nothign like today which I am a bit out dated with the information about how to setup

    Customer:

    somene told me if I do it myself I need to do: File a Certificate of Formation online at the Secretary of State website.

    Customer:

    Get an EIN from the IRS on its online website.

    Customer:

    Download an Operating Agreement template legalzoom

    Customer:

    File a form 2553 with the IRS for your S Election.

    Customer:

    I wonder if that is what they were saying about if I file this then I get the benefit of S corp and not have to fil the federal tax?

    Customer:

    Take the foregoing documents to the bank and open a bank account for your LLC

    Customer:

    how do I search and make sure my new LLC name is XXXXX XXXXX?

    JerrySJD :

    You can do it yourself, but I never discourage someone from using legal counsel if they think they might need it. You can search the name right now on the TX Secretary of State site. You have the procedure down pretty well, I must say. Except you do not need a Form 2553 for an S election since this is an LLC.

    Customer:

    yah but I went to an entity class today

    Customer:

    and they said if I do not file something which I did not get the form name then I ahve to file the self employee tax hwich was the disadvantage of LLC

    Customer:

    but if I file a form... then I can file LLC tax as S corp

    Customer:

    and not have to file the fed tax

    Customer:

    which is one of the benefit of S corp which was one of the reason I setup S copr 12 years ago

    Customer:

    and not LLC

    JerrySJD :

    You need a vote to close the sub-S, a Tax Certificate and Articles of Dissolution. All available on the TX Secretary of State site. You need to pay Self Employment tax on any moneys paid out in wages or salary. Now I see why you want the S-corp status. Makes sense.

    Customer:

    ok so I may still setup as a S corp then for my real estate business

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