Discussion:Time in between Sole Prop and S Corp
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Discussion Forum Index --> Tax Questions --> Time in between Sole Prop and S Corp
| 22 June 2007 | |
| Hello: New client came to me and wants me to file his taxes. Great ! I love new clients! He started as a sole prop in the beginning of 2006 but then incorporated late March 2006. There were both revenues and expenses in the sole prop. He would like to ignore the sole prop and put everything into the S Corp. I think we need to do the following: 1) do the 351 calc to see what the outcome is and 2) file taxes by splitting the activity into 2 pieces -- a) sole prop for the first 3 months and b) S Corp for the remainder. He has been told by other CPAs that all of the activity could be combined into the S. I don't want to create more work than I need to so I am running this one by my experts out there. Thank you! | |
Death&Taxes (talk|edits) said: | 22 June 2007 |
| Trust your instincts, Chase; he no can do what the other accountants propose. | |
| 22 June 2007 | |
| I'd say, split it up. No big deal really. A Schedule C for a few months, and a K-1 for the rest. Then you won't have a mess in that rare case of an audit. | |
| June 22, 2007 | |
| Sometimes a pre-subscription agreement is in place by the attorney, which I've been told allows him to be treated as a corp immediately, but haven't heard confirmation of that. | |
| 22 June 2007 | |
| He does not have one -- a pre-subscription agreement, I mean....
Can't wait to hear him whine about SE tax for the 1st 3 months.....(Doesn't that get old after a while?) | |
| 22 June 2007 | |
| How is having the income on a W-2 from the S corp any better than leaving it on Sch C for the first 3 months? What was his salary the rest of the year from the S corp? | |
| 23 June 2007 | |
| Nobody here is going to tell you to break the law and combine the amounts even thou I'm sure lots of the preparers do so. Only major difference is self employment tax. S/E tax may not matter if Sch C period had a loss. | |
| June 26, 2007 | |
| There are other factors besides the S/E tax. There's probably some equipment that needs to be depreciated and maybe some intangible assets that need to be amortized. There's also the added cost of keeping separate books for the year, additional tax preparation fees and possibly additional licensing fees. Oh, and what if there's payroll? Two sets of payroll tax returns and the cost of preparing them as well. | |
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