Client Incorporated

[tracyb]

My client incorporated 02/08 but is still using the sole prop bank account
also using sole prop ein for payroll. A new corp bank account was opened
08/08 and client is using both accounts. Still using sole prop ein for payroll.

Client will eventually only use the new account. Meanwhile,
what are your thoughts on when to create a separate qb file for
the corporation and using both bank accounts. Should we go back
and amend the payroll and file under the corp ein?

Tracy

[erchess]

Accounting And Tax

The corporation needs complete financial statements going back to day one and before those can be done it is necessary to close the books on the sole proprietorship. Balance sheet and account balances for close of SP would be the same as those for opening of Corp. Someone else will have to tell you how this works out in Quickbooks.

I do believe that the payroll needs to be amended.

I also believe that it would have been possible for the Corp to use the SP's EIN but I could be very wrong about that. I have been very wrong before unfortunately.

[geekgirldany]

Has the sole prop. bank account only been used for payroll or are they using it for other expenses and putting income in it also? Just wondering how separate they have kept everything between the corp and sole prop.

[erchess]

Dany

I think you are overlooking the fact that sole proprietorships are begun and ended by the proprietor's decisions. There is no paperwork to file with anyone, ever. It is reasonable to presume that when the corporation came into existence doing the same type of business, the SP ceased to exist and normally speaking all of the property used in the SP would have been contributed to the Corp If corporate minutes and other legal niceties have not been done then they need to be but it really is ok to do the writing after the fact.

These rules would apply if for some reason I changed my SP through which I offer tax prep and advice into say an LLC and elected say to be taxed as a Corp. On the other hand, if the Corp I opened was a Plumbing Contractor, then I could either keep the SP doing taxes or not as I saw fit.

[geekgirldany]

True. I guess what I was thinking it would be a big headache if they just opened the the bank account on 08/08 for the corporate but still using the sole prop. Just thinking of how to keep things separate

[tracyb]

Client incorporated

They are using the sole prop account for income/expense/payroll until
they move it all over. Credit card deposit are going into the new account and
all checks are going into the old account.

I'm thinking at this point, it may be easiest to start a separate qb file for the
corp and report the income and expenses from only the corp bank account there?

So I would have to file the Sch C and 1120S for the tax year.

Can anyone think of a better way?

Tracy

[ChEAr$]

Incorporation

Okay, even though they incorporated a business, did they conduct business AS a
corporation? change stationery? invoices? notify customers and suppliers? Or was
it just business as usual?
IOW, if they didn't hold themselves out to the public AS a corporation, or as doing
business AS a corporation, continue to march with the proprietorship.
File a zero 1120 of course but starting 1/1 insist they do everything right; bill of sale for
assets to the corporation, notifications to customers/suppliers, etc.

IF the above is feasible, this makes it unnecessary to have to revise 941's in corporate
name and go thru the hassle of contacting our hotline with IRS and getting them to
transfer the payments over. A real pain as I can tell you.

Now another way to approach it if they have conducted business as a corporation is
to simply have had the corporation lease the employees from the proprietorship.
The proprietorship would of course invoice corporation for payroll plus applicable taxes.

[geekgirldany]

I agree with Harlan on this. I though it sounded like they had been continuing with the Sole Prop. It would be easier to start the corp at the first of the year. Especially if they really never turned over to it in 2008.