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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 12165
Experience:  Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
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I run a small business out of my home. My accountant has advised

Resolved Question:

I run a small business out of my home. My accountant has advised me to switch from an LLC to an S-Corp to save us some money each year. I have dissolved the LLC and established the corporation, but all Im wondering is do I have to start a new quickbooks account for all my bookeeping and taxes (payroll, etc. ) since I technically have "started a brand new company"
Submitted: 1 year ago.
Category: Tax
Expert:  Megan C replied 1 year ago.

MyVirtualCPA :

Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

MyVirtualCPA :

If you dissolved your LLC and opened up an S Corp you will need to open a new set of books, because you will have to have two payroll reports at the end of the year - the final report for your LLC and the new report for your S Corp

MyVirtualCPA :

I'm confused as to why you dissolved your LLC. You could have simply filed a tax election to be taxed as an S Corp and you would have been able to keep the same business, you just would have had new tax treatment

Customer:

So i probably need to pay and close out anything outstanding from the LLC even though they aren't necessarily due.

MyVirtualCPA :

Yes, close out your LLC completely

Customer:

This was all at the advice of our accountant. I dissolved the LLC, got a new UBI, new EIN, everything.

MyVirtualCPA :

and then keep new records on your S Corp as a clean cutoff since it is a different legal organization

Customer:

starting at the date of the new s corp?

MyVirtualCPA :

Well, everything will work out fine, it's just a lot of work I know closing out a company and opening a new one

Customer:

Since its mid-year, its sort of akward.

MyVirtualCPA :

Yes, the new books would be as of the new date of the S Corp

Customer:

Bummer,

MyVirtualCPA :

Yes, ideally you would have done this effective January 1, 2014

MyVirtualCPA :

BUT you will save money operating as an S Corp over an LLC

Customer:

Which was the idea.

Customer:

This is turning into a bigger deal than I was advised.

MyVirtualCPA :

Haha. Yes, I realize that. It's never easy. It sounds easy enough when you're sitting across the desk from the accountant, but once you realize what you need to do to transition over, it's not easy

MyVirtualCPA :

I worked for a major international corporation that bought out another firm, and rather than absorb them into the company they just kept it as a subsidiary so that they didn't have to do all the closing out and work behind switching companies

MyVirtualCPA :

But, as an accountant that was a pain because I had two different sets of ledgers to keep track of :-(

Customer:

He mentioned something about transferring all assets from the LLC to the new corp, but I think at the end of the year. Is that correct?

MyVirtualCPA :

Yes, and I would let your accountant handle all of that because it can be tricky

MyVirtualCPA :

If they have a bookkeeper in house, I would almost pay a few hundred dollars to have them set up your quickbooks file

MyVirtualCPA :

so that it's done right

Customer:

I am the bookeeper. :-(

MyVirtualCPA :

For the accountant?

Customer:

oh no!

Customer:

Haha,

MyVirtualCPA :

No, I mean the accountant typically will employ 1-2 bookkeepers if they are a small firm

Customer:

Ok,

MyVirtualCPA :

and they do quickbooks consulting, at least all the ones I've worked for have had that

Customer:

and its worth it to pay them to setup my new account

MyVirtualCPA :

I say yes. It will make your accountant love you too because they won't play the guessing game when they go to do your taxes

MyVirtualCPA :

"what did she do????"

Customer:

They do, they helped me set up the original accounts but it was expensive

MyVirtualCPA :

I wouldn't think it should cost more than $500 or less

Customer:

OK. I shouldve known this was going to be a big deal.

MyVirtualCPA :

it shouldn't take them 5 hours, unless your business is good sized.

MyVirtualCPA :

BUT!! Find out what they will charge before agreeing to it

MyVirtualCPA :

I'd get them to quote you a flat fee

Customer:

VERY small business.

MyVirtualCPA :

none of this $100 an hour business

Customer:

Ok.

MyVirtualCPA :

it should save you on the back end, because the CPA will charge more per hour for your final annual return

Customer:

Well thats good. So at the end of the year I will have the LLC, and the S corp for my tax returns

MyVirtualCPA :

yes, for this year

MyVirtualCPA :

then ideally moving forward you will have just the S corp

Customer:

Ok, and its worth it that we switched right?!?!

MyVirtualCPA :

Well, you will save lots of money on taxes because you won't be paying employment taxes on your entire net income

MyVirtualCPA :

just the portion you allocate as salary

Customer:

Which is great. That will be significantly less.

Customer:

Thank you for your help.

MyVirtualCPA :

Thats good. You're welcome...glad to be of service

MyVirtualCPA :

If you need anything else, please don't hesitate to contact me.

Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 12165
Experience: Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
Megan C and 3 other Tax Specialists are ready to help you

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