Relocation of an S-corp to a new state


B

Bill B

I'm working on deciphering some of the aspects of Sec 368(a)(1)(F) in
relation to "moving" an S-corp from one state to another via what
would technically be a tax-free reorg. I'm not clear on whether the
original EIN is retained once the new entity is set up with the new
state's SOS. Any advice or recommendations on how this should be
structured would be appreciated. The business has quite a bit of
history under the existing EIN and would prefer to not have to
recreate a tremendous amount of work for business credit, etc.

Bill B.
 
Ad

Advertisements

H

HLunsford

Bill said:
I'm working on deciphering some of the aspects of Sec 368(a)(1)(F) in
relation to "moving" an S-corp from one state to another via what
would technically be a tax-free reorg. I'm not clear on whether the
original EIN is retained once the new entity is set up with the new
state's SOS. Any advice or recommendations on how this should be
structured would be appreciated. The business has quite a bit of
history under the existing EIN and would prefer to not have to
recreate a tremendous amount of work for business credit, etc.

Bill B.
I found no problem with that. Just establish new corporation in new
home state and continue to march.

It's only an instance of changing from one state to another.

ChEAR$,
Harlan Lunsford, EA n LA
 
S

Stuart A. Bronstein

HLunsford said:
Bill B wrote:

I found no problem with that. Just establish new corporation
in new home state and continue to march.

It's only an instance of changing from one state to another.
So a new EIN isn't necessary for the new corporation? I'm aware that
when there's a merger the joint company can choose which company's
bank routing number (on checks) to use. But I'm not aware of how
that works for EIN's.
 
T

Tempuser

Stuart said:
So a new EIN isn't necessary for the new corporation? I'm aware that
when there's a merger the joint company can choose which company's
bank routing number (on checks) to use. But I'm not aware of how
that works for EIN's.
The OP stated he was "moving" an S-corp from State A to State B.
If, this was just a change in physical location, then the EIN is
okay. If the charter moved, i.e., a new corporation chartered in
State B was created, then a new EIN is also required.
 
S

Stuart A. Bronstein

Tempuser said:
Stuart A. Bronstein wrote:
The OP stated he was "moving" an S-corp from State A to State B.
He also said it was going to be a tax-free reorganization. You don't
do that unless another corporation formed in the new state is
involved.
If, this was just a change in physical location, then the EIN is
okay. If the charter moved, i.e., a new corporation chartered in
State B was created, then a new EIN is also required.
That's what I thought.
 
B

Bill B

He also said it was going to be a tax-free reorganization.  You don't
do that unless another corporation formed in the new state is
involved.


That's what I thought.
More detail:
LLC #1 was established in State A as a home-based service business and
has an extensive credit and banking history. LLC elected S-corp
treatment when it was set up.
LLC #1 member/manager has relocated to State B, and there is no longer
a presence in State A nor a need to keep the LLC operating in State
A. This will also avoid having to register as a foreign LLC in State
B and file multiple state tax returns.

The research I've done seems to indicate that it would be necessary to
set up LLC #2 in State B (and elect S status), and then LLC #2
acquires LLC #1 as a QSub, and dissolves LLC #1 and proceeds to use
LLC #1's EIN.

It seems like a lot of paperwork to go through, but perhaps I'm
overcomplicating the process?

Bill B.
 
H

HLunsford

Tempuser said:
The OP stated he was "moving" an S-corp from State A to State B.
If, this was just a change in physical location, then the EIN is okay.
If the charter moved, i.e., a new corporation chartered in State B was
created, then a new EIN is also required.
Nope. not required, and that was my point.

My client's corporation was originally chartered by Texas, and operated
as such for a number of years with requisite Texas returns filed.
Actually all operations had been conducted from here during that period;
the headquarters just was in Dallas.

But ten years later, the Dallas "headquarters" was closed down and all
addreses of record changed to here. Accordingly a new state corporation
was formed to take over and the TX charter given up. Same EIN throughout.

Heck, I never even THOUGH to ask IRS if that was okay. grin

ChEAr$,
Harlan Lunsford, EA n LA
 
A

Alan

Bill said:
More detail:
LLC #1 was established in State A as a home-based service business and
has an extensive credit and banking history. LLC elected S-corp
treatment when it was set up.
LLC #1 member/manager has relocated to State B, and there is no longer
a presence in State A nor a need to keep the LLC operating in State
A. This will also avoid having to register as a foreign LLC in State
B and file multiple state tax returns.

The research I've done seems to indicate that it would be necessary to
set up LLC #2 in State B (and elect S status), and then LLC #2
acquires LLC #1 as a QSub, and dissolves LLC #1 and proceeds to use
LLC #1's EIN.

It seems like a lot of paperwork to go through, but perhaps I'm
overcomplicating the process?

Bill B.
If you want to continue to use the State A Corporate EIN, then
the only way to do that is through some form of merger whereby
the State B corp. is the surviving entity. Otherwise, you just
create State B corp. with new EIN and dissolve State A corp.

I´m not sure why you think you need to retain the old EIN just
because there is ¨quite a bit of history.¨
 
Ad

Advertisements

D

Drew Edmundson

I'm working on deciphering some of the aspects of Sec 368(a)(1)(F) in
relation to "moving" an S-corp from one state to another via what
would technically be a tax-free reorg. I'm not clear on whether the
original EIN is retained once the new entity is set up with the new
state's SOS. Any advice or recommendations on how this should be
structured would be appreciated. The business has quite a bit of
history under the existing EIN and would prefer to not have to
recreate a tremendous amount of work for business credit, etc.

Bill B.
You may want to take a look at Rev. Rul. 57-276. It briefly
lays out the process. Please note the "57" means it was
issued in 1957. 368(a)(1)(F) has been amended since then.

While the Rev. Rul. does not specifically address the EIN
question you will note it addresses most other carryover
issues. For the EIN question you can refer to Letter Ruling
200528021. While it refers to an operating corporation
switching to an LLC, taxed as a corporation, the principles
still hold.

Drew Edmundson, CPA
Cary, NC
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Similar Threads

USA S corp shareholder basis 0
USA S corp shareholder basis calculation 0
New S Corp - reimbursement of expenses 14
Unreimbursed expenses for new S Corp 8
USA New company LLC, S Corp? 3
USA New business S-corp or LLC? 5
S CORP 1
USA S-Corp 0

Top