changing a single member LLC to S corp in NJ

Technical topics regarding tax preparation.
#1
newbie  
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i am new to the field here and sarting to go on my own. What is the step by step process for a client to change from a single member LLC to an S Corp. Thank you for your help
 

#2
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The client could fill out a Form 2553, sign it (twice, I think), and mail it to the IRS. There's a longer and more complicated way to do it, but I'm too lazy to explain it...
 

#3
HowardS  
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For NJ:

A corporation electing to register as a New Jersey S Corporation must complete and file a New Jersey S Corporation Election, Form CBT-2553. The filing due date for Form CBT-2553 is one month later than the time to file a Federal election.

For the election to be valid, every shareholder of the corporation must consent to the election and other requirements of the State. The corporation will be notified within 30 days after filing Form CBT-2553 whether or not the election is accepted.

Once an election is made and accepted, a corporation remains a New Jersey S corporation as long as it is a Federal S corporation. To revoke an election, a letter of revocation must be filed. The letter must be signed by all shareholders holding more than 50% of the outstanding shares of stock on the day of the revocation and a copy of the original election form must be enclosed. The filing deadline for a letter of revocation is on or before the last day of the first tax year of the election.

For more information on S Corporations, see the publication S Corporation Questions and Answers.
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#4
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Thanks for covering for my laziness, Howard.

Do we think that an SMLLC electing to be treated as an association (and electing S corporation status) for federal tax purposes will come under the same rules as a "real" corporation in NJ?

NJ's publication "S Corporation Q&A (Rev. 8/06)" doesn't seem to even acknowledge that there's anything other than a "real" corporation that would - or could - elect S corporation status for NJ.
 

#5
HowardS  
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For Fed, form 2553
For NJ, form CBT-2553
Too much of a coincidence to ignore and the filing deadline is one month after the Federal filing. LLC's are a state invention so I would file it just to cover myself...what's the worse that could happen...rejecting it because I'm an SMLLC and not a 'real' corporation?

Also, from the same Q&A's:
A corporation which is an S corporation for Federal purposes but does not elect S corporation
status for State purposes would be subject to the corporate tax rates for ordinary corporations, 9%,
7½%, or 6½%

When you file your 1120-S, does NJ differentiate between a real S-Corp and an LLC electing to be taxed as an S-Corp? I see more potential issues with not filing than with filing. You are correct, however in saying that NJ isn't clear on this issue.

Also found this link: ftp://www.njleg.state.nj.us/20122013/AL12/50_.PDF Refer to section 92, Tax Classification. While it speaks to foreign LLC's, I would opt for consistency in tax treatment for domestic LLC's.
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#6
Nilodop  
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This is weird. I just wasted spent a half hour looking online for an answer. Near as I can tell, ALL the stuff online speaks only of an actual, statutory corporation's making the NJ S election. I'd guess that an LLC can do it, but you'd never know it from NJ Taxation etc.
 

#7
lucyko  
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I think Newbie is interested in S-Corp status for New York not New Jersey .
 

#8
HowardS  
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Is that a mistake only a "newbie" would make? :lol:
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#9
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"...a mistake only a "newbie" would make?"
Better not be; I would insist that some of us who are not "newbies" could and would also make such a mistake!! :o
 

#10
Nilodop  
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About as good as it gets.
Note: Both Single-Member LLCs and Multi-Member LLCs can choose to be taxed as an S-Corp.
https://www.llcuniversity.com/irs/tax-r ... ax-paying/

Most states recognize an LLC’s federal S-Corp tax election, however New Jersey does not and instead, they require you to file a CBT-2553 with the NJ Division of Taxation.
. https://www.llcuniversity.com/new-jersey-llc/taxes/
 

#11
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thanks so much for all of this. such great comments. for those of you that are experienced doing this, is there anything i need to do a far as the books/quickbooks is concerned here? thank you again for your time here
 

#12
Doug M  
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Can you give us the cash basis balance sheet in round numbers? Just want to see if there is a possible taxable event to convert
 

#13
tshonk  
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My experience with NJ and S Corps is the election will be rejected atleast once do to timing of the filing. My recomendation is to let a registered agent in NJ handle all of the paperwork. The company will need a registered agent regardless for annual filings.
 

#14
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Doug M wrote:Can you give us the cash basis balance sheet in round numbers? Just want to see if there is a possible taxable event to convert


approx 20,000
 

#15
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tshonk wrote:My experience with NJ and S Corps is the election will be rejected atleast once do to timing of the filing. My recomendation is to let a registered agent in NJ handle all of the paperwork. The company will need a registered agent regardless for annual filings.


i think this is why i needed step by step guidance. i thought the owner can act as the registered agent since it seems that the registered agent does not do that much
 

#16
Nilodop  
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newbie, I suspect Doug M was looking for more detail than "20,000". List cash basis assets at their basis, with a description (cash, inventory (none, I assume), fixtures, etc.) and list liabilities such as loans, credit card debt, etc. but not accrued expenses.
 

#17
HowardS  
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As per 42-2C-14, your LLC’s Registered Agent must have a physical street address located in the state of New Jersey. Is your client a NJ resident? If so, he/she can be his/her own registered agent. You never stated if this is a foreign or domestic NJ LLC.
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#18
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HowardS wrote:As per 42-2C-14, your LLC’s Registered Agent must have a physical street address located in the state of New Jersey. Is your client a NJ resident? If so, he/she can be his/her own registered agent. You never stated if this is a foreign or domestic NJ LLC.


yes resident of NJ and a domestic LLC
 

#19
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Nilodop wrote:newbie, I suspect Doug M was looking for more detail than "20,000". List cash basis assets at their basis, with a description (cash, inventory (none, I assume), fixtures, etc.) and list liabilities such as loans, credit card debt, etc. but not accrued expenses.


ok but wouldnt i need to get that info as of 12/31/18?
 

#20
Nilodop  
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For filings, yes, but for planning make an educated guess.
 

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