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Im hoping you can address my situation as specifically as…

I'm hoping you can address...
I'm hoping you can address my situation as specifically as possible rather than giving me a boxed answer. I have sought CPA and attorney advice in the past for several different things and it seems the more I pay the less they listen.

Here is my scenario, I have been running an s corp in California for six years now. Started with 20,000 shares to me alone for services rendered at some arbitrary par value that I don't have in front of me.

Let's call the California s-corp, Dumb Name, Inc. (EIN XXXXXXXXX .

Filings are in good standings.


I recently moved to Texas and opened another corporation in Texas this month thinking about perhaps dissolving Dumb Name, Inc.. Started Awesome, Inc. with 100,000 shares at $0.01/share ($1000) services rendered (100% owner also.)

Let's call the Texas corporation Awesome, Inc.

Now I am at a quandary. I want to hang onto the old EIN and the age of the old corporation and do a reorganization/merger but move everything to the new name as a Texas corporation.

I already applied for an EIN for Awesome, Inc. and sent in my s-election form with it.
(Do I cancel that? Does Awesome, Inc. need an EIN to participate in an f-reorganization?)

I was filling out the Texas Certificate of Merger and put that Dumb Name. Inc. would survive and Awesome, Inc. would not. Party 1 and 2. Then under Organizations created by merger, I put Awesome , Inc. (again - because ultimately, I want it to be called Awesome, Inc.)

Then I started piecing together an Agreement and Plan of Merger.

I put:
(1) the dissolving entity as Awesome, Inc.
(2) the surviving entity as Dumb Name, Inc.
(3) the final entity as Awesome, Inc.

I put the current value of Awesome, Inc. at $1,000 because I just incorporated it at that value.

I also put the current value of Dumb Name, Inc. as $3000 (guestimated) assets (some fully deducted/non-depreciated equipment and some web domains) and $1000 liabilities (reimbursements I owe myself.)

I also said that Awesome, Inc. will have a zero conversion of interests and Dumb Name, Inc. will have a conversion ratio of 1:1. because Awesome, Inc. is currently nothing and Dumb Name, Inc. is and has everything.

So can I do this if:

I want to keep the old EIN but assume the new name ending up as Awesome, Inc. with EIN XXXXXXXXX

The number of shares aren't equal.

The valuation (albeit arbitrary) is different for both.

In the end, I just don't see how to legally and legitimately make it so that me, Naive Guy, owns 100% of I don't know how many shares of Awesome, Inc. which has Dumb Name, Inc.'s EIN and equipment and web domains. Where is the document that states that? Where is that on record in Texas? Yes I know I have Naive Guy owning 100,000 shares of current Awesome, Inc. on file with Texas but is that the same as NEW Awesome, Inc. with Dumb Name, Inc.'s EIN and stuff?

What other forms and documents to I need to write up to square this away?

Ultimately, I'm just a small-timer here obviously. I can't afford an appraisal of my miniscule assets and an attorney to take me through the whole process.
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Answered in 10 minutes by:
1/24/2013
Dimitry K., Esq.
Category: Business Law
Satisfied Customers: 41,221
Experience: Run my own successful business/contract law practice.
Verified

Thank you for your question. Please permit me to assist you with your concerns.

Since you are opening a brand new entity outright, then filing for a new EIN makes sense. The new company would have a new EIN and would simply obtain all of the assets and debts of the old company but not obtain the old company's legal identity. This does make sense, although I must admit I did not at first see the necessity of applying for a new number.

A for your other questions:


I want to keep the old EIN but assume the new name ending up as Awesome, Inc. with EIN XXXXXXXXX
That would not be wise. You do so but then you would need to file for a DBA (Doing Business As) in the new state, and instead file there as a foreign corporation, essentially transferring your original "Dumb" company into a "Dumb" company in Texas, but one that would be known as "Awesome" when it conducts business with others.

The number of shares aren't equal.
Not an issue at all. A share of one company can be worth a fraction of an another's or a 1000 shares of a different entity.

The valuation (albeit arbitrary) is different for both.
Also not an issue. The difference in valuation can be attributed to 'good will' or other subjective value.

All you need are articles of dissolution to be filed with the original company, and a personal transfer agreement between the entities showing that the transfer of assets took place, then the dissolution would take place.

For California:
http://www.sos.ca.gov/business/llc/forms/llc-3_4-7_4-8.pdf

For Texas:
http://www.sos.state.tx.us/corp/forms/205_boc.pdf

Good luck.

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Customer reply replied 5 years ago

You wrote:


 


"I want to keep the old EIN but assume the new name ending up as Awesome, Inc. with EIN XXXXXXXXX


That would not be wise. You do so but then you would need to file for a DBA (Doing Business As) in the new state, and instead file there as a foreign corporation, essentially transferring your original "Dumb" company into a "Dumb" company in Texas, but one that would be known as "Awesome" when it conducts business with others."


 


I'm not sure if there is a slight language barrier.


 


If I merge Dumb Name, Inc. and Awesome, Inc. and then come out as Awesome, Inc. since the Certificate of Merger allows me to name the organization created by the merger and also allows me to declare which of the merging entities will survive, can't keep the name I like and keep the EIN I like? How does this end up with me having to "instead file there as a foreign corporation" and operate under a DBA?

Thank you for your follow-up.

Communicating on the internet does at times have their drawbacks, and that my cause the inconsistency. Please permit me to clarify.

To answer directly, when you merge you take two existing business entities with two separate EINs and turn them into one entity. The entity that survives keeps the EIN of the surviving entity. So if you want "Awesome" to survive, the EIN that will be attached to it would be "Awesome". The "Dumb" EIN will die out at the same time the "Dumb" entity will be merged into "Awesome", as otherwise if the "Dumb" EIN will be saved, then it would be the "Dumb" entity that would survive. If that is what you want, the "Dumb" EIN remains and you then instead have to file in the new state as a foreign corporation, transfer the old business into the new locale, and then create a DBA with whatever name you wish. If it makes it easier, equate Dumb with Old EIN and Awesome with New EIN. Think of it as their social security numbers, which is essentially what they are--a person cannot change their SSN, neither can a business without creating a whole new persona and a new identity. Old EIN, old persona.

Good luck.

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Customer reply replied 5 years ago

So there is no way to bring the old EIN to Texas without registering as a foreign corporation?

That is correct, because the EIN is owned by the California entity. I will always remain a foreign corporation to Texas. You would need to create a whole new business entity with a brand new EIN in Texas, as otherwise even if you register your old company as "Awesome" in Texas, the alter ego would still be dumb since the EIN would be the same.

Good luck.

Dimitry K., Esq.
Category: Business Law
Satisfied Customers: 41,221
Experience: Run my own successful business/contract law practice.
Verified
Dimitry K., Esq. and 87 other Business Law Specialists are ready to help you
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Customer reply replied 5 years ago

Pardon my ignorance, but it sounds like you are saying businesses can't change their state of "residence". Once a California corporation, always a California corporation.


 


I myself moved to Texas and am now a resident of Texas with a Texas driver's license but I kept my social security number.


 


Are you saying that corporations can't move to different states and keep their EIN's. The IRS agent told me that they don't care where the corporation is registered?

Corporations can change their residence. They do so by filing in the new state as a 'foreign corporation', and moving their location to that state. But even if they moved over, they still remain 'foreign' once they initially filed elsewhere as their primary location. However you may perhaps have a misconception of a difference between a 'domestic' and a 'foreign' corporation. For tax purposes there is no difference, a foreign corporation simply shows that it did not originate in the state where it is now based.

Good luck.

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Customer reply replied 5 years ago

Does that mean that you are subject to tax in both the new state of residence and your state of incorporation? Double tax?

Once you dissolve your original entity in the original location, the old state no longer taxes the entity. There is no double taxation.

Good luck and kindly rate my answers positively if satisfied with my information. Thank you!

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