I will try and keep this concise, I have a new client (investor A) who has a RV park operating as an Scorp (sole shareholder). He wants to take on a partner (investor B), but they both would like to do it (especially Investor B) with a new entity. The attorney for my client recommended an LLC be set up, and the scorp would then be "dissolved into the llc" (his words), and then Investor B would buy 1/2 interest in the LLC. The attorney says it would basically be a reorganization (since single shareholder and single member llc are the same person)....it would save on transfer taxes income tax, etc
In my mind dissolving the scorp would still be looked on as a sale of assets, and my client would have capital gains on fmv of the assets over his cost basis....then he could move the assets into whatever entity he wished.
Am i missing something here, is there some way to accomplish getting the assets from the scorp into a new entity with an additional investor without subjecting my client to possible taxation? We are in Virginia.