topic Did not properly set up the business? in Get your taxes done using TurboTax

Did not properly set up the business?

centrexcr — Mon, 13 Jul 2020 21:40:19 GMT

Last year I bought a business that I had been working for. Previous owners paid all the legal fees and the lawyer applied for the EIN and state license. It was registered as an LLC with me as the sole member. I did not file Form 8832 or 2553 (did not read further down the page except to get my EIN), so would this mean I am considered a sole proprietor and would I still need to file to be an S corp?

Re: Did not properly set up the business?

BillM223 — Mon, 13 Jul 2020 21:57:29 GMT

If you (OR the previous owners!) never made the election to be taxed as a corporation or as an S Corp, then you are taxed as a sole proprietorship using Schedule C on your 1040 return.

You would not file an 1120S return unless you or the previous owners made the election to be taxed as an S Corp..

Re: Did not properly set up the business?

centrexcr — Mon, 13 Jul 2020 22:11:45 GMT

Just to be clear: even with a new company name and EIN, if the previous owner was set up as an S corp I would then file an 1120S

Re: Did not properly set up the business?

BillM223 — Mon, 13 Jul 2020 22:25:18 GMT

That would be a question for the lawyer who did the sale - is this a new entity that just bought the assets of the old company and created a new company, or did the sale effectively preserve the legal status of the old company?

Did the previous owners file a 8832? Then this becomes something important to know.