Inventory entries for old, dissolved LLC and new sole proprietorship

[cjhepburn1964]

I dissolved a single-member LLC in 2025 and opened a new sole proprietorship in another state. 

My question is regarding inventory entries on my Schedule C. 

I have seen differing opinions on how to handle this and wondering if it's 6 of 1 or a half dozen of another. 

First, I've seen experts answer similar questions by saying that ending inventory for the dissolved business should be zero, and the actual ending inventory should be "removed for personal use". That makes sense to me. 

I've seen another opinion that says that the old and new businesses are essentially one and the same, since both businesses/EINs are synonymous with me. So in light of that, there's no need to say that I ended my first business and started a new one. All that needs to be done is that the EIN is updated. I'm not so sure about that opinion.  

I'm leaning toward the first opinion being correct, and it's simple enough to do on the tax forms. But I'd love to see other opinions on this.

But my most pressing question is in regard to starting inventory for the new business. Is it simply the amount that was "removed for personal use" on the old business? Or should it be zero and the "removed for personal use" amount added in? 

Thanks in advance for any thoughts.  

[Hi Palms]

It is " 6 of 1 or a half dozen of another".  Your single member LLC is totally disregarded for federal income tax purposes so it makes no difference, BUT if you take the first approach you're going to have issues with ending and starting inventory as you mentioned in your final questions. I'd take the second approach personally.

[cjhepburn1964]

Since I moved to a new state, I kind of like the first solution since I think state taxes would be murky if I didn't separate the businesses? Not sure. 

[Hi Palms]

Right and it really depends on how the state handles LLC taxation in terms of tax forms to be filed.

[Mike9241]

The correct tax accounting depends on how you handled the LLC inventory. If you threw it out, the ending inventory is $0. You get a deduction for the loss. If it was transferred to the sole proprietorship, for the LLC, you must indicate it was withdrawn for personal purposes. The ending inventory for the LLC would still be $0 but no loss. On the SP you list the same amount as a purchase.  Other scenarios are possible, but we would need details of what you did with the LLC inventory 

[Hi Palms]

 If it was transferred to the sole proprietorship, for the LLC, you must indicate it was withdrawn for personal purposes.

You don't have to do that for federal income tax purposes. The LLC and the sole proprietorship are both reporting on Schedule C.

[cjhepburn1964]

Yes, the inventory from the old business went to the new business, since part of the new business is essentially the same as the old business. I offer the same products with the same brand name. 

The new business offers additional products under a couple of new brand names, so it's not exactly the same as the old business. But for sure the inventory from the old business was put to use and sold by the new business. 

[Hi Palms]

Up to you but I wouldn't change it.....just continue on with the sole propretorship on Schedule C as you have been reporting for the LLC, which is the same.