USA Switching from S-Corp to Partnership LLC


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My brother and I are owners for a S-Corp in Georgia. He's a passive investor and I'm the manager/employee. The corporation is experiencing reduced revenues so we're thinking about switching over from S-Corp to LLC Partnership in order to reduce our overheads / costs and simplify things.

Since I'm on the only employee at this time and I get paid on an annual basis at the end of Dec, to keep things simple I've been filing the following:

Quarterly:
941 - $0 for Q1,Q2,Q3
GA DOL-4A - $0 for Q1,Q2,Q3
GA DOR-G7-M - $0 for Q1,Q2,Q3

Annual:
940
GA DOR G-1003
W2
1099

As I understand the 1040-ES and 500-ES would be required to be paid by each member/partner whether it be for S-Corp or LLC Partnership.

Would I need to continue to file the other forms if we switched from S-Corp to LLC Partnership?

If there is no W2 and my brother continues as a passive investor, he would only be responsible for 1040-ES and 500-ES based on the quarterly P&L and since I'm the only active manager but now with a LLC Partnership I don't need to pay myself a payroll, I don't need a W2 but will continue with the quarterly 1040-ES and 500-ES. However since I'm actively managing the LLC I would need to pay employment taxes (50% of which can be expensed). Can this be done at the end of the year as part of filing the annual tax returns or do I still need to go through the quarterly and annual filings as I'm currently doing with the S-Corp?
 
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Feb 2, 2021
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Typically, converting the tax status of the companies is more common the other way around - converting an LLC into S Corp tax status. In your situation, I would recommend starting a new LLC as the cleanest method. If you're not issuing any wages through your S Corporation currently, you're not benefiting from the advantages of the S Corporation. So, you're stuck with all these extra payroll filing requirements. If you start an LLC from scratch - both owners would receive a K-1 reporting your share of the profits at year end (similar to the S Corp K-1). Your K-1 would reflect the income as self-employment earnings - so you would be paying self-employment tax on any profits (since you're managing the business). Your brothers' K-1 would reflect passive income - since he's not actively involved (and is not subject to self-employment tax). You both would pay in any anticipated taxes from the profits via the estimated tax payments you had mentioned. There would be no further need for quarterly or annual payroll tax returns and filings.
 

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