Scorp

[Unregistered]

Client. a sole prop. , doctor, wants to convert to Scorp.

Here is a problem.

(1) He has fed ID # for Sole prop. business and thart ID has been given to medicare, medicaid, insurance co. etc. If he converts , then he needs to change FED ID and this would cause a nightmare for client. Is there a work around. Can he setup Scorp and have "sole" as agent of "S" corp?

(2) Is it necessary to have different ID when sole coverts to Scorp? Some time you do not need to.

[Uncle Sam]

S Corp

The doctor is converting a sole proprietorship to a corporation.
First, a corporation application has to be made to the Department of State for the resident state to approve the corporation name, and an attorney should draft a corporation agreement.
Yes - in setting up a corporation - you MUST apply for a separate and distinct corporation Employer Identification Number by completing an SS-4 form, either online or completing it manually and calling IRS on the phone. The current ID the doctor has is for a sole proprietorship. It CANNOT be used for corporation tax ID purposes.
Next, you need to prepare the documentation and recordkeeping for a Section 351 incorporation. I suggest you review Section 351 of the IRC.
Next, you need to complete Form 2553, and comparable state equivalent (if there is any) for a SubChapter S election. This needs to be done within 2 1/2 months after the corporation has been formed, otherwise you lose it for the first year.
Once you get the Federal Employer ID #, you should inform all of the medical insurance companies that he gets health insurance benefits from of the changeover to a corporation WITH the new corporation employer ID number. This is important, because at year end, the insurance companies will need to issue the 1099-MED forms. If issued to his former business name, IRS will be looking for the 1099 income to be reported on his personal tax return.
In addition, the doctor's salary is going to be reported on a W-2, with the corporation ID number matching the corporation name.

[Unregistered]

THank you, Uncle Sam

[jainen]

a little more income

>>he needs to change FED ID and this would cause a nightmare for client<<

If that's his idea of a nightmare then he must be a very mellow guy. His secretary is going to do it all for him in less than an hour. And all the labs and agents and vendors are going to be thrilled because now they won't have to send out 1099s to him and they can hide a little more income.

[rosieea]

>>he needs to change FED ID and this would cause a nightmare for client<<

If that's his idea of a nightmare then he must be a very mellow guy. His secretary is going to do it all for him in less than an hour. And all the labs and agents and vendors are going to be thrilled because now they won't have to send out 1099s to him and they can hide a little more income.

See page 23-8 of TTB. Medical & health care payments are reported on 1099-MISC, even if the payee is a corporation.