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How to change business entity information with the IRS


Change of business entity information such as business name with the Internal Revenue Service:

 

The following action is taken to update the correct information with the IRS.

 

Change information for a sole proprietorship business with the IRS: Write a letter to the Internal Revenue Service to notify the changes such as new name and address of the business.

 

Change information for a profit corporations with the Internal Revenue Service:

 

  • The current business information can be corrected on form 1120 Page 1, Line E, Box 3 while filing business return end of the year.
  • The current business information on form 1120-S Page 1, Line H, Box 2 is corrected the end of the year when filing business returns.
  • OR Refer IRS publication 1635 for the change of entity information to the Internal Revenue Service.

 

Change information for the partnership with the Internal Revenue Service: If you are filing a current year Form 1065, mark the appropriate name change box on the form: Page 1, Line G, Box 3.

 



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How to convert an LLC into a Corporation or the other way around in IL


What is statement of conversion Illinois?

 

 

The state of conversion is filed with the state of Illinois to change an existing company structure such as a limited liability company to a corporation or vice versa.
 
 
Generally, the stockholders' of the corporation, members of the limited liability company and the investors to acquire the tax benefits or by-pass the restrictions under the existing business entity.
 
 

What is the process and the estimated time to convert a company structure to another?

 

 

  • The statement of conversion is filed with the Illinois secretary of states, according to the entity structure such as to convert into a limited liability company.

  • State of Illinois provides a privilege to convert profit corporations, limited liability companies, general partnership and limited partnership, limited liability partnership into a different entity type.

  • There is no dissolution is applicable after the conversion from one business entity type to another.

  • A new new employer identification number is obtained after the conversion because the existing EIN can not be used.

  • An estimated time to convert from one business type to another in the state of Illinois is two weeks.

  • The Illinois state filing fee is $275.00 for an LLC and $250.00 for a corporation.

  • A final return is filed of the existing entity with the state of Illinois and the Internal Revenue Service.



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Does state of Illinois allow conversion from LLC to Corportion


If one has a single member LLC in Illinois and needs to become a C corporation to take an investment, is it advised to convert to a C corporation or to create a C corporation and dissolve the LLC?

 

Does Illinois allow an entity conversion from corporation to convert an LLC or vice versa?

 

Yes, the IL Secretary of state allows the conversion from one structure to another, such as corporation to an LLC or LLC to a corporation.

 

One has the following options to treat an LLC a corporation:

 

Option-1:

 

Convert, LLC to a C Corporation for the tax purpose:

In this option, a request is sent to the Internal Revenue Service to file taxes as a C Corporation and the LLC structure does not change in this option.

 

This option is generally used to pay salaries to the LLC members, because a member of an LLC is not allowed to withdraw payroll.

 

Option-2:

 

Convert, LLC structure to a C Corporation:

 

Not every state of the USA allows a conversion from an LLC to a corporation or vice versa. Secretary of state determines if the statue allows the conversion.

 

In this option a new employer identification is obtained from the Internal Revenue Service and an LLC absorbs in a C Corporation.

This method is generally used for the tax benefits and making investments under a corporation instead of an LLC though the investment can also be done under an LLC.

 

Option-3:

 

Open a new Illinois C Corporation and dissolve Illinois LLC.



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How does an LLC tax based on the income or money deposited in the bank


Is it both members of an LLC that will pay the individual tax or will it be based on the amount of money paid into an LLC bank account?

 

The LLC members are taxed on the income which is either pass to the owner through K1 if it is not a disregarded entity otherwise it is reported directly to the schedule C, E or according to the business activity.

 

Paying taxes based on depositing money in the bank amount is irrelevant because it can a mixture of investment, loans, salary or others.

Additional tips for an LLC member:

 

Salary is not allowed to an LLC, member unless file an election to the IRS to treat the LLC as a corporation or an S corporation for the tax purpose only.

 

Disregarded LLC files income on the Form 1040 whereas as multi-member LLC files Form 1065.

Most of the banks ask the operating agreement of the registered LLC to open a bank account.



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How can I form an LLC in Delaware as a foreigner or non US resident?


The Delaware secretary of state allows to any nonresident or foreigner, whether physically presented in the USA or not is eligible to incorporate business in the state of Delaware.

 

The following requirements are to be followed while filing a Delaware LLC:

 

  1. Search the entity name before filing the article to incorporate a legal entity with the Delaware secretary of state to do business.
  2. Acquire a registered agent services which provide the address to incorporate a company in Delaware. This service is offered by many independent companies. DE Secretary of state does not provide the registered agent services.
  3. The registered agent address is not used to advertise business and to do so a physical location is rented.
  4. A complete article is either faxed or mail to the DE Secretary of state. Electronic signatures are not acceptable.
  5. The entire process takes estimated 24–48 hours. One can visit to the DE secretary of state website after 48 hours to see if the name is approved or not.
  6. Once the article is approved, then the Form SS4 is IRS to acquire an EIN which is used to open a bank account and filing taxes.

 

 



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