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Law Pro
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Category: Business Law
Satisfied Customers: 23597
Experience:  20 years experience in business law - sole proprietor, partnership, and corporations
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I am filing for a new FEIN for a new business with the IRS.

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I am filing for a new FEIN for a new business with the IRS. If I elect to make the business owner an individual, versus an Entity, and then wish to change the owner to an entity in the future, how difficult is it to do this? What are the required steps?
Submitted: 11 months ago.
Category: Business Law
Expert:  J. Warren replied 11 months ago.
Hello! Thank you for your question today. My goal is to provide you with the information you seek.

Please note: (1) this is general information only, not legal advice; and (2) I will provide you with honest information and not necessarily to tell you might be hoping to hear.

If you change the form of entity for a business the current FEIN would need to be canceled and a new FEIN issued to the new entity. FEIN are assigned to the type of entity. If a business is operated as a sole proprietorship and obtains an EIN and then later changes the form of entity to a corporation a new EIN would be required.

Here is a link that you might find helpful: www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Do-You-Need-a-New-EIN%3F

It is not difficult to cancel and then be issued a new FEIN in the future should you change entity formation.

I apologize that this was probably not the answer you were hoping to receive. However, it would be unfair to you and unprofessional of me were I to provide you with anything less than truthful and honest information.

All my best & encouragement.

Please note that you are asked to rate my courtesy and professionalism, and not whether the answer supports your legal position. I only receive credit when rated 3 or higher. If for any reason you feel that a 2 or 1 rating is appropriate, please first give me the opportunity to address your concerns by clicking the "reply" or “continue conversation” tab.

All states have intricacies in their laws and any information given is simply information only and specifically is not intended to be, nor does it constitute, legal advice. This communication does not establish an attorney-client relationship with you.

 

Customer: replied 11 months ago.


My quesiton did not ask what happens when I change the business structure of a business. I inquired as to what happens when you change the owner of the business from an individual to an Entity. For example, if I file for an FEIN and make the owner John Doe and then at a later point would like to make the responsible party ( owner ) an entity, such as XYZ Inc., how do I go about changing the owner? What are the steps? Does this require a change in busness structure? Or does the IRS simply treat this as a sale of business?

Expert:  Law Pro replied 11 months ago.
Hi, new expert here - allow me to assist.

You asked:

what happens when you change the owner of the business from an individual to an Entity. For example, if I file for an FEIN and make the owner John Doe and then at a later point would like to make the responsible party ( owner ) an entity, such as XYZ Inc., how do I go about changing the owner? What are the steps? Does this require a change in busness structure? Or does the IRS simply treat this as a sale of business?


Answer:


Generally, businesses need a new EIN (employer identification number) when their ownership or structure has changed. Although changing the name of your business does not require you to obtain a new EIN.


If you change from a sole proprietorship to a corporation - you need to get a new EIN.

If you change from a sole proprietorship to a partnership - you need to get a new EIN.

If you operate as a sole proprietorship and change the company name (but don't incorporate or form a partnership) - YOU DO NOT need to get a new EIN.

If you form a partnership - then change to a corporation - you need to get a new EIN.

To obtain an EIN or get a new EIN - here is a link where you can do that on line:

https://sa2.www4.irs.gov/modiein/individual/index.jsp


Now as to your other questions:

For example, if I file for an FEIN and make the owner John Doe and then at a later point would like to make the responsible party ( owner ) an entity, such as XYZ Inc., how do I go about changing the owner?


For a sole proprietor to form a corporation - it's very simple.


The first choice you would make is in what state to form the corporation.

If you want to form the corporation in the state of Washington - here is a link to a step-by-step guide:

http://www.dmlp.org/legal-guide/forming-corporation-washington



Does this require a change in busness structure?

I'm not exactly sure of your question here - but yes the change of business form would require a new EIN.

Forming a corporation is a change of business structure and, as per the above link, it's easy to form a corporation in Washington.


Or does the IRS simply treat this as a sale of business?

No, they would classify this as a change in business form - therefore you would need a new EIN number.


Thank you so much for allowing me to help you with your questions. I have done my best to provide information which will be helpful to you. If I have not fully addressed your questions or if you have any follow up questions, or if I have misinterpreted your questions in any way, please do not rate me yet, but simply ask a follow up question without rating so I can provide you with a fully satisfactory answer. If I have fully answered your question(s) to your satisfaction, I would appreciate you rating my service with 3, 4, or 5 faces so I can receive credit for helping you today. I thank you in advance for taking the time to provide me a positive rating!

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Law Pro, Attorney
Category: Business Law
Satisfied Customers: 23597
Experience: 20 years experience in business law - sole proprietor, partnership, and corporations
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