Conversion of SMLLC treated as s corp to MMLLC partnership

Evening! I am hoping to check my understanding of this situation in order to advise my client correctly. My client is the single member of an LLC formed in 2011. Form 2553 was filed 1/1/13 to treat the business as an s corp. Effective 1/1/19, he would like to add a new member. That member is itself an LLC, they're talking about two classes of stock -- obviously this will not be an s corp anymore. He is thinking that this will be an LLC taxed as a partnership. My understanding of what this all means is that the s corp status will be rescinded and it will then become a c corp. To "convert" to a MMLLC will mean a deemed liquidation of the business assets and liabilities to the original owner. Correct? If so, I have two questions:

1) I'm not clear on the logistics of actually filing this. Is the easiest thing to actually terminate the LLC, file the final 1120-S, and distribute everything to the sole member? Does that mean the loss of the EIN (or is it lost no matter how we do this)? If I file Form 8832 to change the entity back to a disregarded entity instead, will I file a final 1120-S or will it be form 1120 instead? I'm just not understanding if there's really a difference between actually terminating the business or going through the process of filing forms to change its status.

2) Maybe a bigger issue is goodwill. It seems crazy that the goodwill and other assets will be contributed right back into the new MMLLC by the original sole member, who will be the majority member of the MMLLC, and that the business will continue as before, seamless to the outside world, and yet he will be taxed on whatever value might be given to the goodwill of the business at the time that the s corp/c corp is considered liquidated. Am I wrong in thinking that goodwill is an asset that will be deemed to be distributed to him in this situation? I have read a bit about the idea of personal versus corporate goodwill. I think there's a good chance that the goodwill in this business would be considered corporate.

I can't tell if I'm really off base in my thinking and have complicated this more than is necessary, or if it really is this complicated and significant, in terms of tax repercussions. Thanks for any help.

He is thinking that this will be an LLC taxed as a partnership.. Because that's the goal, or because he thinks that just happens? The termination of the S corp. status just leaves him as a C corp. It's the actual or deemed liquidation that causes the gains, both at the corporate level and the s/h level.

That's the goal -- MMLLC taxed as a partnership. (He does think it just happens, though. That's why I'm trying to make sure I'm correct about what it will actually entail.)

Can't an S corp. own an interest in a partnership? How about his existing S corp and the new owner form a partnership. with the S corp. dropping all its assets into a new partnership with the new owner, who, I assume, invests cash? The partnership can have different terms for sharing etc.

What the heck! I would never have thought of that. And I'm not sure I can think it through even now, if I'm being honest. How do the tax filings work after that? Where are the operations of the business reported?

Okay, I understand -- operations are reported in the new partnership and flow through to the old LLC and the new owner's entity. Old LLC reports its distributive share from the partnership and flows that through to the original SMLLC member. No taxable transaction with the old LLC contributing assets to the new partnership. Right? Wow. Thank you so much for your help!

Is the issue of goodwill applicable with this scenario, or not because there's no liquidation? FYI, the other partner is not contributing assets, just expertise. Another thing. But his share will be minimal, like 7%.

I got called to dinner.

Yes, you have the idea. Goodwill just drops like other assets. There are several posts about partnerships with a partner only contributing expertise.