USA Change of Entity C-Corp to Sole Provider

[Kay]

I have a client that changed from a C-Corp to a sole proprietorship in mid year of 2014. For some reason prior accountant advised him to incorporate as a C-Corp. No paperwork has been filed for dissolution of the corporation and I am not sure if the state has dissolved the corporation. Am I correct that all assets currently being used in the sole proprietorship actually belong to the C-Corp? His accountant passed away and his books are a mess. As far as the sole proprietorship I will be setting up new files. Taxes have not been filed year prior to the change or since.

Thanks

 

[Pat A.]

First of all, you cannot change from a C-Corp and switch to an Sole Proprietorship. You can stop using a C-Corp then begin to do business as a Sole Proprietorship (which is really a bad idea). If the C-Corp had assets that were clearly owned by the C-Corp such as Bank Accounts, Equipment, Vehicles, Leases, Inventory, etc, then all of these items would still be owned by the C-Corp until the Bank Accounts are liquidated and most likely a taxable event would occur in that case (I think your client needs to do that part carefully and legally), and then all of the other items would have to be properly "sold" to the Sole Proprietor in the proper way. This is a somewhat complex situation depending on certain factors. I would need more information to give a full response. Please let me know if you would like to discuss further.