An LLC filed 2020 initial tax return as a partnership. The owners want to make a late S election now for 2021.
1. Does 2020 1065 need to be amended and marked "final" since 2021 will be filed on 1120S? There was a minimal activity in 2020 and the 1065 was already amended once by the previous accountant (don't know why).
2. The clients' attorney is advising to convert the LLC to a corporation with CA SOS, I assume in 2022.
If a late S election is granted by the IRS back to 1/1/2021, but the entity is converted with the state to an S corp in 2022:
a. Should they convert 1st and then file the S election or doesn't matter? For example form 2553 would list ownership interest for an LLC, but a number of shares for a corp.
b. Would the entity need a new EIN in 2022 when converted with the state?
c. What happens to the S election under the old EIN if a new EIN is required?
d. Would a short year return be required for before and after conversion periods?
e. I think CA state corp number wouldn't change in a conversion, but would it create a mess to file federal returns with different EINs with the same state corp number?
f. There's a large profit in 2021 and the owners would benefit from an S election in 2021 due to the QBI deduction, what's the best way to handle this situation without creating a massive headache? The attorney is open to keeping the entity as an LLC with the state if that makes things easier.