When you convert a single member LLC to an S Corp. do you treat it as a new entity or do yo simply just change the name and keep "rolling"? What about carryovers? This client has a NOL carryover from previous years. How do you set up the equity section?
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How was client previously reporting? Sched. C-Sole Prop. or C Corp. or Partnership.
If a C Corp. client must file Election to be taxed as an S Corp. with the IRS.
In any case all NOL carryforward will be lost. -
He currently files Schedule C...Comment
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Converting a Schedule C (LLC) to an S Corp is the same as starting an S Corp from scratch. Since this single member LLC probably owns 100% after the conversion, there is no tax on the contribution of assets to the S Corp. Thus, the depreciable basis of all assets continues on the S Corp books as if it were still a Schedule C business.Originally posted by Unregistered
The equity section, however, must record the FMV of all assets upon conversion. So you have two sets of books - one for tax accounting which is the old Schedule C basis, and one for bookkeeping which is the FMV basis.
As to NOL carryovers, the NOL was that of the individual, not the business. Even though the business may have generated the NOL, it is still the individual's NOL to carry forward. You simply report it as a negative on line 21 of the 1040 in the following year to offset any other income the individual may have.Comment
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