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RD
RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8784
Experience:  CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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I need guidance of how to close a S-Corp entity and change

Customer Question

I need guidance of how to close a S-Corp entity and change a LLC company name for both federal and state purposes. There are several other transactions to occur, yet I'm not sure if there are any tax consequences that I need to to consider with the following plan of action:   I have 2 companies... Company A is a S-Corp, Company B is a LLC. There are some assets in Company B that Company A can purchase. Company B also has an outstanding Notes Payable to an owner and Company A. Once company B is closed and assets transferred/purchased, I plan on changing the name of Company A.    I'd like to work with someone who can review my books and walk me thru the transactions to ensure a smooth transition or perhaps suggest another plan of action. My overall goal is to minimize any tax consequences overall.
Submitted: 5 years ago.
Category: Tax
Expert:  RD replied 5 years ago.

Are you 100% owner in both the entity? Are you filing the LLC as a S Corp for tax purposes?

 

Why do you want to close Company B?

Customer: replied 5 years ago.

1) There are 3 owners for each entity and yes they are the same. 2) No, the LLC is files as a partnership.

 

At first the owners wanted a seperate company as a S-corp. There has been minimal activity with Company B for the past 2 years. They have now changed their mind and just want one company as Company A with 2 lines of business, however they want the 'name' of of the S-corp.

Customer: replied 5 years ago.

Sorry, I just reread my question and have mixed up Company A and B! Please review changes I have 2 companies... Company A is a S-Corp, Company B is a LLC. There are some assets in Company A that Company B can purchase. Company A also has an outstanding Notes Payable to an owner and to Company B. Once company A is closed and assets transferred/purchased, I plan on changing the name of Company B . There is minimal activity with Co A (S-Corp) and most activity occurs with Co B (LLC). I've suggested that once we get the assets of Co A to Co B (from the S-Corp to the LLC) we could change the name of Co A (LLC) to that of Co B (S-Corp) but ending with LLC, vs. Inc. Co A (LLC) is filed as a partnership, Co B (S-Corp) is filed as S-Corp. Again, sorry for the confusion. If you determine this is a project you'd like to accept we can change to actual company names.. which will be easier! Thanks!

Expert:  RD replied 5 years ago.

IS the fair market value of the assets in S Corp higher than the cost basis?

In order to close the S Corp the assets and liabilities will have to be liquidated and will result in undesirable tax consequences if the S Corp has appreciated assets.

 

Is the Company A an LLC which has elected S Corp or is it formed as a Corporation?

 

Since these issues are normally complex and would need detailed information, I would suggest you to hire a local professional to help you with this matter.

 

 

Let me know if you have any question.

 

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.

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