The s corp election is for tax purposes only and I am still considered an LLC (pass through). The s Corp status does not make me a corporation as I think was misunderstood.
Nope. For tax purposes if you elect S-Corp status the business is not a pass-through entity in the same sense that an LLC is. While an LLC is a disregarded entity, an S-Corp is not.
If you want the IRS to treat your business like an S-Corp for tax purposes only, then the business must act like an S-Corp. That means the business (you) have to follow all the rules, laws and regulations that an S-Corp does, as defined by federal law and your state. Once you elect the S-Corp status, then when inquiring for tax help, you have an S-Corp. Calling it "all LLC that has elected the S_Corp status" is going around your elbow to get to your thumb. In a tax support forum such as this, you have an S-Corp. Period.
An S-Corp is required to file it's own physically separate tax return on IRS Form 1120-S and issue K-1's to all owners/shareholders. Also with an S-Corp, an owner can also be a W-2 employee. But that does not negate that owner from taking an RMD each year as required.
Basically, to transfer assets from the LLC to the S-Corp, you will first close the LLC. To do that, you have to dispose of any and all assets, inventory and show vehicle disposition even if that vehicle was less than 100% business use.
For the LLC, all assets and any remaining inventory are "removed for personal use". TO close the LLC all assets must be disposed of and your EOY Inventory balance *must* be zero. To get those to zero you have to remove it from the LLC "for personal use". Any vehicle use claimed by the LLC is also removed for personal use.
Once the LLC is closed you then need to print out the 4562 that pertains to the business assets, as you'll be entering that data on the S-Corp return. All assets going to the S-Corp are a capital contribution to the corporation. They are not acquired by the S_Corp by any other means by any other means.
You're also going to have issues with start dates. Here's the gist.
Date the businses was open - This will be the date the LLC on the SCH C was opened. Does not matter if it was years ago either.
Date of incorporation - This will be the date you incorporated. This date "MUST" be at least one day after the close date of theSCH C LLC business.
WHen entering assets, the 4562 from the SCH C is just a guide and will require some math on your part to get the numbers right. Get them wrong, and you won't realize it until the day you close or otherwise dispose of the S-Corp or your share in the S-Corp.
Now I've barely hit the tip of this iceberg. This is why you need professional help in "AT LEAST" your first year of this, and especially in the year you make the election/conversion. You'll find the cost of professional help in that first year will be a pittance when compared to the fines, penalties and back taxes you *will* be assessed if you mess it up.
For example, under normal circumstances (for 2019, circumstances are not normal) the filing deadline for a corporate return in March 15th. File it one day late and the late filing penalty is $200 per owner/member/shareholder for each month the return is late. Now I'm not sure, but I think for 2019 corporate returns the filing deadline is extended to July 15th, 2020 - same as extended for personal 1040 tax returns.
