Business Law

Ask a business lLawyer. Get business law questions answered ASAP.

Ask a Lawyer,
Get an Answer ASAP!

We've been an S Corp since 1991. (Machine Shop) The business…

Customer Question
We've been an S Corp...
We've been an S Corp since 1991. (Machine Shop) The business was downsized in 2006, and currently has only the two owners/officers as employees (a husband and wife)with one part time person who comes in only when needed. We are no longer operating like a legal S Corp in ways such as maintaining annual meeting minutes, the wife (VP/Secretary), who has another outside part time job but still maintains the S Corp's books, does not take a salary, the Pres/Treasurer (husband) takes very little salary and not on a regular payroll schedule. Basically, we are 60 yrs old, just wanting to maintain the business for 5-6 yrs until full retirement. We have enough personal savings to retire but need the business to pay for itself and our health insurance costs until we can draw full retirement benefits. In 2014, we sold our business property, which was much more than we currently need, for a smaller commercial property. The sale was structured as a Reverse 1031 Exchange, which required us to set up an LLC to hold title of acquired property until the existing property was sold. The LLC is still in existence, treated as a subsidiary of the S Corp, and the property (building and lot) is still titled to that LLC. All other business operations are run as and business property (such as manufacturing & office equipment, etc) is owned by the S Corp. While we'd prefer to change the business to a sole proprietorship, the liability to personal assets probably makes that a bad idea. That's unfortunate since that most closely resembles our current operation. However, we are wondering if it would be a better idea, at this point in our career, considering the reality of our current operating practices and in light of the fact that an LLC already exists, to dissolve the S Corp and operate as the existing LLC (changing the current name of the LLC to the current name of the S Corp) (Would the LLC be less complicated with fewer legal requirements, record keeping requirements and easier taxation issues?). Any advice would be much appreciated.
Submitted: 2 years ago.Category: Business Law
Show More
Show Less
Ask Your Own Business Law Question
Answered in 31 minutes by:
2/15/2016
Business Lawyer: Law Educator, Esq., Attorney replied 2 years ago
Law Educator, Esq.
Category: Business Law
Satisfied Customers: 125,313
Experience: All corporate law, including non-profits and charitable fraternal organizations.
Verified
Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.
In a closely held S-corporation, meetings and minutes from meetings are very informal. They can be done sitting at a dinner table and written on a piece of loose leaf paper, it does not have to be formal. I would suggest you keep a notebook, the meetings do not have to be elaborate or even long, it can simply be a note saying nothing was done at the meeting and officers continue in their current roles. One line. So that is not really a huge burden and most closely held S-corps never keep meeting notes and go back if needed and recreate them.
The LLC and S-corp have nearly identical operating procedures. The LLC is actually the modern version of the S-corp. So dissolving the S-corp and keeping the LLC would not really benefit you much at all. The LLC and S-corp tax requirements and record keeping are also pretty much identical, so that does not save you either.
At this point, especially with the 1031 exchange still in play and the fact you only have a few years left before you wind up and retire, I would suggest it is much less trouble to keep everything the way it is than trying to restructure your whole business operation.
Ask Your Own Business Law Question
Customer reply replied 2 years ago
Thank you for your response. I'd appreciate just a bit more insight. First, the 1031 Exchange is not still in play. The Exchange was completed at the end of August 2014 when the sale of our old/relinquished property was finalized. We just have not dissolved the LLC and have left property title in the LLC's name. For us, the LLC does nothing once the 1031 Exchange was completed and we intended to dissolve it but just haven't. (Both the LLC and S Corp are registered yearly with the MN Secretary of State.) I understand what you're saying about the annual meeting minutes, and I've got a lot of years to recreate, but that's doable, I guess. What about the fact that I, the wife and an officer of the S Corp, work for the Corp but take no salary, my husband takes very little and not regularly. I was under the impression that laws that govern S Corp (such as having a spouse work in the business with no pay, not having a regular pay schedule/Pay Periods, etc) and weren't followed could spell serious trouble and fines for the business owners. If that's not the case, then, I agree, there's no point in changing the business structure. I just need assurance that continuing to operate as a Mom and Pop Shop, which is basically what we're doing, while still structured as an S Corp isn't going to put us at risk for legal trouble.
Business Lawyer: Law Educator, Esq., Attorney replied 2 years ago
Thank you for your reply and clarification.
So, dissolving one of the two entities would not really be much of an issue and you can pick which one, so since the LLC does not serve any purpose, winding it up and filing articles with dissolution with the secretary of state makes most sense.
Even though you are not taking pay from the S-corp, immediate family in a closely held S-corp frequently do not take pay and they are exempt from minimum wage and fair labor standard rules, so that is not going to be a real issue for you. If you operate your business as an S corporation or a sole proprietorship, you do not have to worry about corporate taxes. The income from your business is reported on your personal return, whether or not you or your spouse is paid a salary. So income to you and your spouse as owners/officers of the S-corp is not really an issue as it would be to not pay a non-owner/officer.
Ask Your Own Business Law Question
Was this answer helpful?

How JustAnswer works

step-image
Describe your issueThe assistant will guide you
step-image
Chat 1:1 with a business lawyerLicensed Experts are available 24/7
step-image
100% satisfaction guaranteeGet all the answers you need
Ask Law Educator, Esq. Your Own Question
Law Educator, Esq.
Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 125,313
125,313 Satisfied Customers
Experience: All corporate law, including non-profits and charitable fraternal organizations.

Law Educator, Esq. is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

Mr. Kaplun clearly had an exceptional understanding of the issue and was able to explain it concisely. I would recommend JustAnswer to anyone. Great service that lives up to its promises!

Gary B.Edmond, OK

My Expert was fast and seemed to have the answer to my taser question at the tips of her fingers. Communication was excellent. I left feeling confident in her answer.

EricRedwood City, CA

I am very pleased with JustAnswer as a place to go for divorce or criminal law knowledge and insight.

MichaelWichita, KS

PaulMJD helped me with questions I had regarding an urgent legal matter. His answers were excellent.

Three H.Houston, TX

Anne was extremely helpful. Her information put me in the right direction for action that kept me legal, possible saving me a ton of money in the future. Thank you again, Anne!!

ElaineAtlanta, GA

It worked great. I had the facts and I presented them to my ex-landlord and she folded and returned my deposit. The 50 bucks I spent with you solved my problem.

TonyApopka, FL

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

< Previous | Next >

Meet the Experts:

Infolawyer

Infolawyer

Attorney

2,002 satisfied customers

Experienced lawyer

Dimitry K., Esq.

Dimitry K., Esq.

Attorney

1,611 satisfied customers

Run my own successful business/contract law practice.

MShore Law

MShore Law

Attorney

1,233 satisfied customers

Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements

RGMacEsq

RGMacEsq

Attorney

778 satisfied customers

Licensed Texas General Practice Attorney

Barrister

Barrister

Attorney

678 satisfied customers

17 years practicing attorney, JD, BA, MBA

Ely

Ely

Attorney

604 satisfied customers

Counselor at Law.

J.Hazelbaker

J.Hazelbaker

Attorney

393 satisfied customers

Experienced and trained in the area of business law.

< Previous | Next >

Related Business Law Questions
I have an LLC it is in an online business in Alameda county.
Hi I have an LLC it is in an online business in Alameda county . I will be doing a pop event in another county would I need to apply for anything to do business there ? … read more
KLAW
KLAW
Juris Doctorate
2,193 satisfied customers
In the event a company is a corporation and not an LLC would
In the event a company is a corporation and not an LLC would it be easier to sue the owner by actual name who owns the company?… read more
LawGuy
LawGuy
Juris Doctor
123 satisfied customers
Being a member of a sub S corporation, another shareholder
Being a member of a sub S corporation, another shareholder went rogue, bringing in hazardous waste, unbeknowing to the rest of the other shareholders. … read more
WiseOwl58
WiseOwl58
JD Honors Graduate
4,165 satisfied customers
I have an S corporation and I am being sued for failing to
I have an S corporation and I am being sued for failing to pay advertising cost to Thomas.net for $6000, business is online and not doing well, what are my best options? … read more
Attorney Wendy
Attorney Wendy
Member
Juris Doctorate
968 satisfied customers
If I register my business (psychotherapy practice) in one
If I register my business (psychotherapy practice) in one county but plan to also see clients in another county as well, do I need to register my business at both DBA office?… read more
Jessica B
Jessica B
Juris Doctor
1,316 satisfied customers
I purchase an S corporation, the seller demand from me as a
I purchase an S corporation, the seller demand from me as a buyer to get a new EIN and stop using the entity EIN. However getting a new EIN will terminate the corporation account with important financ… read more
Ray
Ray
Lawyer
Doctoral Degree
33,048 satisfied customers
I have a business question for my LLC I own an LLC in Oregon
I have a business question for my LLC I own an LLC in Oregon but are looking to acquire a franchise in Florida under the same LLC … read more
Law Educator, Esq.
Law Educator, Esq.
Attorney
125,313 satisfied customers
Loren, If S Corporation wants to become a holding company
Loren, If S Corporation wants to become a holding company with couple other S Corporations under it what documents have to be filled? Thanks… read more
LawGuy
LawGuy
Juris Doctor
123 satisfied customers
Loren, If an S Corporation under the name ABC wants to do
Hi Loren, If an S Corporation under the name ABC wants to do some business under a name GGP, (meaning company ABC is doing business as GGP) i what should be officially done to associate "the second na… read more
LawGuy
LawGuy
Juris Doctor
123 satisfied customers
I merged my sub s corporation with a group of other
I merged my sub s corporation with a group of other companies back in 2011; since that time they bought me out and I retained ownership of approximately 9% of the new company. On the closing documents… read more
Law Educator, Esq.
Law Educator, Esq.
Attorney
125,313 satisfied customers
I am the secretary for a family S Corporation. Each year
I am the secretary for a family S Corporation. Each year prior to the shareholder meeting, I send paper proxies out for signature....it is difficult getting them back. If I email them, can the person … read more
Infolawyer
Infolawyer
Attorney
Doctoral Degree
2,002 satisfied customers
We have a small business a LLC corporation in Los Angeles
We have a small business a LLC corporation in Los Angeles California. When we hire an employee should we have them fill out an application or sign a part time employment agreement. What is the differe… read more
RGMacEsq
RGMacEsq
Attorney
Doctoral Degree
778 satisfied customers
What are the steps to change ownership in a s corporation in
What are the steps to change ownership in a s corporation in California? Initially it was 2 shareholders, I have to remove one of them.… read more
socrateaser
socrateaser
1,031 satisfied customers
Does an LLC business pay the new business tax rates? If not
Does an LLC business pay the new business tax rates? If not what business types could I form to pay the new rates and not my personal tax rate? How is the 20% deduction calculated?… read more
Attorney Wendy
Attorney Wendy
Member
Juris Doctorate
968 satisfied customers
I ran an S Corporation (consulting) for 3 years that was
I ran an S Corporation (consulting) for 3 years that was incorporated in California. I live and work in California. I stopped doing business as the S Corp in 2014 and started doing part time work unre… read more
Richard - Bizlaw
Richard - Bizlaw
Juris Doctor
3,765 satisfied customers
We have an s corporation. In the shareholder agreement there
We have an s corporation. In the shareholder agreement there is a provision that the corporation must repurchase shares from minority shareholder when offered. Shareholder Agreement further states tha… read more
Roy Hadavi
Roy Hadavi
Attorney
Juris Doctorate
1,225 satisfied customers
Converting my llc business to a c corporation and looking
Converting my llc business to a c corporation and looking for a lawyer to sign the paperwork … read more
Richard - Bizlaw
Richard - Bizlaw
Juris Doctor
3,765 satisfied customers
My S corporation is a member of an LLC which has other
My S corporation is a member of an LLC which has other members in it as well. Can my S corporation be the listed manager of the LLC in Illinois? All the members agree to having the S Corporation as th… read more
RGMacEsq
RGMacEsq
Attorney
Doctoral Degree
778 satisfied customers

DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.

The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).

DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.

The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).

Show MoreShow Less

Ask Your Question

x