Accounting & Bookkeeping & Small Business Forum

[SB Bookkeeper]

I had a client who is wanting to switch from incorporated to sole prop. What does he need to do in order to do that?

Does he only need to mark on his tax return for his corp that that is the last year as corp??

Does he need to get a new tax id . Any comments will be appreciated.

[sgbdad23]

Start with finding why he would want to do this.
There are advantages to being a sub chapter S Corporation rather than a sole proprietor, both for tax and liability purposes.

He would not need a new tax ID, becasue a a SP he would only need to use his SS#.

He may need a ficticious name license, unless his business name is his name.

THere are some costs to remaining an S-corp, but in my opinion, once you have gone to the S-corp you probably do not want to go back.

Hope that this helps
Scott

[Richard Noot]

sgbdad23 wrote: Start with finding why he would want to do this.
There are advantages to being a sub chapter S Corporation rather than a sole proprietor, both for tax and liability purposes.

He would not need a new tax ID, becasue a a SP he would only need to use his SS#.

He may need a ficticious name license, unless his business name is his name.

THere are some costs to remaining an S-corp, but in my opinion, once you have gone to the S-corp you probably do not want to go back.

Hope that this helps
Scott I agree. Also, there can be some unfavorable tax consequences by switching.

[RobJ]

SB Bookkeeper wrote: I had a client who is wanting to switch from incorporated to sole prop. What does he need to do in order to do that?

Does he only need to mark on his tax return for his corp that that is the last year as corp??

Does he need to get a new tax id . Any comments will be appreciated.
I wouldn't recommend that your client make the switch until he/she consults with someone who has experience dissolving corporations. There are some serious tax consequences that your client wouldn't want to discover down the road. A shareholder meeting has to take place to dissolve the corporation. There are assets and liabilities that have to be transferred from the corporation to the sole proprietorship. This is one of those times when it pays to hire an experienced professional. I wouldn't want to be in your shoes some day if it turns out the advice you gave was misguided. I did some "Googling" and here's one person's advice: http://taxquips.com/?id=299.

Best of luck,

Rob