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machineshopgirl
Level 2

Changing from Sole Prop to LLC due to death of owner

I have been using quickbooks for over 13 yrs for a Sole Prop, recently the owner passed away. His wife graciously is allowing her son and I to continue running the business under her as a Single Member LLC. knowing that she and her husband always filed joint 1040 forms, my question is this...

 

can I change the FIEN to the LLC FIEN, enter in the new Bank Account information (closing the old accounts with SSN attached to them) and enter the new Resale #, in to the current QB company file the the start date of 07/01/2018, and continue on?

 

or do I need to open a new company?

 

I would be grateful for any help.

 

Solved
Best answer July 30, 2018

Best Answers
E1
Level 2

Changing from Sole Prop to LLC due to death of owner

As I understand it the business was run as an unincorporated entity up until the passing of one of the owners.  The surviving owner has established an LLC and obtained an EIN through which the business will be run by you and her son for compensation.

 

Your questions are as follows:

  1. Can you discontinue the use of the sole proprietorship EIN and commence using the LLC's EIN in Quick Books?
  2. Can you close bank accounts which are in the name of the previous owner (owner's SS#) and begin using new LLC bank account (new EIN) in Quick Books?

Since there has been no change in ownership you may proceed as intended.

 

For cleaner books I recommend starting fresh.  For example, creating a new company in Quick Books with the new EIN number and bank account and transferring the old ending balances to the new company.  Also, I recommend reporting Schedule C under the old EIN up until the owners passing and starting fresh with the LLC's EIN subsequently.

 

I know it's more work but it's cleaner both on the tax and record keeping sides.  Best of luck!

View solution in original post

E1
Level 2

Changing from Sole Prop to LLC due to death of owner

With respect to the topic, there are no legal requirements, just keeping clean books.  Best of luck!

View solution in original post

10 Comments
Rustler
Level 15

Changing from Sole Prop to LLC due to death of owner

LLC is not a type of busoiness that has a tax id, it is either a sole proprietor or a partnership or a corporation

 

If she is the owner, and files a schedule C, it is her business as a sole proprietor

 

A soleprorpietor can apply for an FEIN so that they do not have to use their ssan, but that is not a business FEIN it is a sole proprietor (that person) federal ID Number.

 

If you are taking it over as owner, then it is a new company to you, new books under your ssan or FEIN if you apply for one

 

the old business closes and she files a final schedule C showing the date the business closes.

machineshopgirl
Level 2

Changing from Sole Prop to LLC due to death of owner

thank you...

 

the LLC is a single managing member, which will still have to file 1040, but creating new books should make it cleaner... although SOOOOO much work, while still tring to run the day to day shop...

 

you time is valued and I thank you for taking the time to respond.

Raywhite28
Level 7

Changing from Sole Prop to LLC due to death of owner

Actually, if the mother still owns the business & the son just runs it & gets a paid for it. There is no change. 

If she sold it to the son, then that’s a change.  

If she gave it to him, that’s a change also but may be subject to gift taxes.

Check with your accountant on this.

Anonymous
Not applicable

Changing from Sole Prop to LLC due to death of owner

@machineshopgirl, sorry to hear about the loss but glad that everyone wants to keep the working pieces together. Your experience will be invaluable to them going forward. 

 

@Raywhite28, please give me a hand with the details, but even if there is "no change," the event of the death should be reflected in the books - i.e. closing the accounts and reopening to show the change over? 

Raywhite28
Level 7

Changing from Sole Prop to LLC due to death of owner

@James

 

Im going to defer to their accountant on this. 

 

E1
Level 2

Changing from Sole Prop to LLC due to death of owner

As I understand it the business was run as an unincorporated entity up until the passing of one of the owners.  The surviving owner has established an LLC and obtained an EIN through which the business will be run by you and her son for compensation.

 

Your questions are as follows:

  1. Can you discontinue the use of the sole proprietorship EIN and commence using the LLC's EIN in Quick Books?
  2. Can you close bank accounts which are in the name of the previous owner (owner's SS#) and begin using new LLC bank account (new EIN) in Quick Books?

Since there has been no change in ownership you may proceed as intended.

 

For cleaner books I recommend starting fresh.  For example, creating a new company in Quick Books with the new EIN number and bank account and transferring the old ending balances to the new company.  Also, I recommend reporting Schedule C under the old EIN up until the owners passing and starting fresh with the LLC's EIN subsequently.

 

I know it's more work but it's cleaner both on the tax and record keeping sides.  Best of luck!

View solution in original post

Anonymous
Not applicable

Changing from Sole Prop to LLC due to death of owner

@E1, thanks for shedding some more light on this based on your experience. Would @machineshopgirl want to do this for legal reasons? Or is it just best practice?

 

Either way, it seems to make the most sense to start fresh so there's clear differentiation and an intentional indication of change. 

E1
Level 2

Changing from Sole Prop to LLC due to death of owner

With respect to the topic, there are no legal requirements, just keeping clean books.  Best of luck!

View solution in original post

Anonymous
Not applicable

Changing from Sole Prop to LLC due to death of owner

@E1, as good a reason as any :)

machineshopgirl
Level 2

Changing from Sole Prop to LLC due to death of owner

thank you for responding!!!

 

the 81 year old Mom still owns the business, her son works here as the GM and collects a Paycheck, and has 0% ownership.

 

unfortunately my accountant is out of the country at this time, and I'm looking to get this done.

 

Your time is valued and appreciated. 

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