Convert from Partnership to S Corporation

[Duane Anderson]

What Federal forms do I need to complete to convert a client from an existing partnership to an S corporation? They are doing the conversion primarily for liability protection. Thanks, Duane Anderson

[Corduroy Frog]

Don't Think So

Duane, I don't think you can "convert." I believe you have to dissolve the partnership, then create the S Corp anew. If I'm correct, then the capital structure does not simply assume the same respective shares except by consent of the shareholders.

Like to hear from others. The essence of the above observation is that new percentages of ownership and profits/losses are not automatically inherited.

There can also be fallout in the form of gains/losses triggered.

[taxxcpa]

converting

Forming the corporation would require a State charter. You would then need to get an EI number for the corporation, file the form with the IRS to elect taxation as an S Corporation .
Mark the last Partnership return as "final."

[oceanlovin'ea]

type of entitiy

The type of entity is established with the state. Did he form the company as a partnership? or an LLC? or a corporation? I looked at the website for Florida and you can convert a partnership to a corporation. You can also merge a partnership with a corporation. In this case you would have to establish the corporation and then merge them. You would have to check with your state website to see if it is possible.

How you are taxed is a different matter? That is determined by IRS. If he formed an LLC, he would just be required to file correct form to change tax structure, Form 8332 I think.


Linda

[kpangelinan]

Duane, I don't think you can "convert." I believe you have to dissolve the partnership, then create the S Corp anew. If I'm correct, then the capital structure does not simply assume the same respective shares except by consent of the shareholders.

Like to hear from others. The essence of the above observation is that new percentages of ownership and profits/losses are not automatically inherited.

There can also be fallout in the form of gains/losses triggered.

I agree.....might even do it for the ease of the process.

Forming the corporation would require a State charter. You would then need to get an EI number for the corporation, file the form with the IRS to elect taxation as an S Corporation .
Mark the last Partnership return as "final."

Agree. Close the partnership and start a new corporation.

The type of entity is established with the state. Did he form the company as a partnership? or an LLC? or a corporation? I looked at the website for Florida and you can convert a partnership to a corporation. You can also merge a partnership with a corporation. In this case you would have to establish the corporation and then merge them. You would have to check with your state website to see if it is possible.

How you are taxed is a different matter? That is determined by IRS. If he formed an LLC, he would just be required to file correct form to change tax structure, Form 8332 I think.


Linda

Usually people just file as partnerships. The norm for partnerships in my area is that there "just" partnerships and we start filing 1065's. I agree with Linda though, if a corp was started, then it looks like you can switch, but not knowing the details of what was mentioned first as in ownership interests, property settlement, basis, etc. it might be easier to just close the partnership and start a new corp.