Selling or Buying a Small Business/buying a business
Iím buying a very small business that is registered as S-corp and want to change it to LLC when I purchase. What MA state and federal forms do I need to file and in what order?
Itís a wine and beer making supply shop that the previous owner ran more as a hobby than a retail store. That said I feel I can run it better as a retail business.
Heís giving me the business, everything in the store, in exchange for paying his bills in arrears and what he has left on the shelves, about five thousand dollars.
I checked the UCC and every other public record I could think of and that was suggested to me. I found no other outstanding accounts in arrears, no liens, no pending lawsuits. I confirmed his arrears with the landlord, utilities, and the wholesale supplier.
The seller just wants out and to walk away from this, heís reaching retirement age, his health and finances are failing, and he wants to spend more time with his kids and grandkids. That said he will be around for as long as I want him to be to help me adjust to running the business. Weíve been running the business together for the past two weekends. The business is in a small town and we live next to each other, so we know each other.
How do we close the S-corp and open LLC to purchase?
How do we transfer the state and federal filings from the seller to the buyer?
The owner is very friendly and corporative. When it switches to LLC, what will this mean for the seller?
Iíve seen 2 attorneys, the chamber of commerce, numerous information and Q & A Online, and the SBA, and the attorneys cost to file the paperwork is more than the business is worth. Iím on my own.
I would really like a check-off list in the proper order for forms that need to be filed for the MA-state and federal govt.
Please let me know if you have any questions.
Hello, Randy, and thank you for contacting All Experts.
I am not familiar specifically with MA law, nor can be giving legal advice, which this actually is. You could probably get this done through a CPA, which might be less expensive than an attorney. Speaking in general, I dont know if you have legally taken over the S corp by having it transferred into your name, or not. You would have to, to actually "take it over". And when taking over or purchasing any corporation, there are latent liabilities you inherit. For example, something that may have happened in the past now appears, and it is your responsibility whether it be legal or financial. It is a big reason why most people do not buy corporations when buying a business. I would be very careful of that. Secondly, when you buy a corporation that owns a business, you cannot create a new depreciation schedule, so you lose the benefit of creating a new depreciation and having legitimate tax write offs.
I believe the general procedure for changing corporation types is to file a final return on one, then apply for a change to another type, but this change has to be approved by the government to assure that you are not doing it simply to obviously save paying taxes.
I really think that your best course of action is to have a professional make these changes you want, and one who can advise you of any potential liabilities. It would be money well spent, to be able to go on with your purchase and not have to worry about loose ends.
Best to you.