Need guidance on converting 4 sole proprietorships into one S-corp structure

Thank you for the clarification! That makes much more sense conceptually. I think I was confused about how the legal structures would work together. So instead of having the S-corp "own" the sole proprietorships, we'd actually be dissolving the sole proprietorships and moving everything under one corporate umbrella? Do you know if there are specific considerations for transferring ongoing contracts from the sole proprietorships to the new S-corp? Some of my dad's businesses have service agreements that run for several months.

Yes, that's exactly right. You'd be dissolving the sole proprietorships and bringing everything under the S-corp umbrella. The S-corp would then operate all four business activities as different divisions or departments. For ongoing contracts, this is where things get a bit tricky and you may need legal assistance. Many contracts have clauses about assignment or change of ownership. You'd need to review each contract to see if they allow for assignment to a new entity, or if you need to get client approval. In some cases, you might need to create novation agreements where all parties agree to substitute the S-corp for the sole proprietorship in the existing contracts.

How exactly does this work? Do I just upload my tax documents and it analyzes everything? I'm always wary about sharing sensitive financial info with online services.

Sounds interesting but seems too good to be true. Did it actually help with the legal side of things too or just the tax aspects? Because as the expert mentioned, there's contracts and state filings to worry about.

Yes, you upload your documents through their encrypted system and their AI analyzes everything to provide personalized guidance. They use bank-level security and their privacy policy is really clear about not sharing your information with third parties. I was hesitant at first too, but their security credentials convinced me. The service primarily focuses on the tax implications, but it does flag when you need to consider legal issues like contract transfers. It won't draft legal documents for you, but it will point out where you need to consult with a lawyer and what specific issues to address. In my case, it saved me from making a costly mistake with how I was valuing transferred assets.

How does this service actually work? Does it just keep calling the IRS until it gets through? That seems like something I could just do myself.

I'm extremely skeptical. The IRS wait times are insane by design. How could this possibly work better than just sitting on hold yourself? Sounds like you're just paying for someone else to wait on hold.

It uses an automated system that continually redials and navigates through the IRS phone menu system. It's more sophisticated than just redailing - it knows exactly which options to select and when. Once it gets through to where you'd normally wait on hold, it holds your place in line and then calls you when an agent is actually on the line ready to talk. You absolutely could do this yourself, but it would mean spending hours (sometimes literally 3-4 hours) on hold. The service essentially does the waiting for you so you can go about your day. I was skeptical too until I tried it - the first time I used it, I got a call back in about 40 minutes when I had previously spent over 2 hours on hold without reaching anyone.

This is super helpful! I didn't even think about the merchant services agreements. Do you have any recommendations for handling the transition period? Did you run both the old and new entities simultaneously for a while, or was it a clean cutover?

I did a phased approach where I ran both simultaneously for about 2 months. I set January 1st as my official transition date for tax purposes, but started setting up the new entity and accounts about 3 months prior. For merchant services, that was actually one of the trickier parts. Some processors treated it as a brand new business application despite having the same owner, which meant new rates and terms. I had better luck explaining it as a "restructuring" rather than a new business. Keep your processing statements handy to show history. I'd suggest creating a detailed timeline working backward from your target date. Also, create an entity-specific email address for all the new accounts rather than using a personal email - keeps everything organized during the transition.

I did this last year. Beyond Form 2553 for the S-election, you'll need: - SS-4 for your new EIN - Form 8832 if you're forming an LLC first and then electing S-corp status - Schedule D for each Schedule C business you're closing to report any asset transfers - Form 4562 for depreciable assets being transferred The trickiest part was making sure I properly documented the value of all business assets transferred to the new entity. The IRS can be picky about this if you're audited.

Thanks for the detailed response! That's really helpful. Did you handle the valuation of your business assets yourself or did you need to get professional appraisals? I'm worried about undervaluing things and causing problems down the road. Also, did you create a formal business plan for the new entity? I've heard that can help if there are ever questions about business purpose for the reorganization.