Level 5

Question

S-Corp with 2 different activities - Close or combine?

Forum|Forum|5 years ago
April 20, 2021
2 replies
17 views

T/P starts Organic Mushroom business with following:

1. Has not filed 1120S for 2020.

2. Original S was for IT consulting - No Income in 2020 so T/P decided not file S.

Note: Has filed all prior years, which started in 2016.

3. Purchased equipment for OM in 2020 and entered on Sch F - other activity from other farming.

My recommendations:

1. File 1120S to avoid further late filing penalties - currently owe $410 for 1 sh.

2. Remove OM equipment from Sch F and report on LLC and file as Sch C and don't depreciate until OM begins business which I am told will be in 2021. Or setup as NEW S?

3. Terminate Original S at end of 2020.

Thoughts/comments - given limited info.

ProSeries Professional

This topic has been closed for replies.

dkh

Level 15

My recommendation - don't take this taxpayer on as a client.

I very much dislike taxpayers that create a huge mess of things then want someone to clean up their mess.

But if you are so inclined to work on this - I would consider leaving the SCorp open and using it for the Organic Mushroom . Is taxpayer only shareholder in S Corp? Will this taxpayer be willing to do a payroll if SCorp remains active? If no, then definitely go with the LLC.

D

dude7707Author

Level 5

Is taxpayer only shareholder in S Corp? - Y - It's H & W only - 50/50

Will this taxpayer be willing to do a payroll if S Corp remains active? Good Q, will advise the options as you stated.

If no, then definitely go with the LLC. - Agree.

qbteachmt

Level 15

"Is taxpayer only shareholder in S Corp? - Y - It's H & W only"

Are you in a community state? Because you just named Two Shareholders. Remember; if they Both Work for the S Corp, they are Each Employees.

You must pay more attention to these details.

"If no, then definitely go with the LLC. - Agree."

You don't need an LLC for that operation.

Don't yell at us; we're volunteers

qbteachmt

Level 15

You didn't give us a sense of scale. Gross revenue, typical costs for labor and materials, which types of assets, staffing requirements, property ownership?

You would not consider this the same corporation as the IT with a new or additional activity. The requirements, operational considerations and labor issues are significantly different.

For instance, you don't want to hold Real Estate in an S Corp, and IT operations won't include Tractors or EPA license for pesticide application.

"Or setup as NEW S?"

S Corp requires Payroll; is that mushroom operation of a nature that Corporate status even makes sense?

"Remove OM equipment from Sch F and report on LLC and file as Sch C"

What does "report on LLC" mean, and why would you consider Sched C instead of F?

Your tax payer can have all the different things going on; it doesn't all have to be under the S Corp, just because it is a Business.

"Thoughts/comments - given limited info."

You know more about all of this than strangers on the internet know. You might also seek legal input, including the differences in risk and insurance for each type of activity.

Don't yell at us; we're volunteers

D

dude7707Author

Level 5

You didn't give us a sense of scale. Gross revenue, typical costs for labor and materials, which types of assets, staffing requirements, property ownership? - Unfortunately I do not have any at this time, other than what is provided...this was just a general Q, which I realize cannot be answered accurately unless have specific info!

You would not consider this the same corporation as the IT with a new or additional activity. The requirements, operational considerations and labor issues are significantly different. - Agree 100%.

For instance, you don't want to hold Real Estate in an S Corp, and IT operations won't include Tractors or EPA license for pesticide application.

"Or setup as NEW S?"

S Corp requires Payroll; is that mushroom operation of a nature that Corporate status even makes sense?

"Remove OM equipment from Sch F and report on LLC and file as Sch C"

What does "report on LLC" mean, and why would you consider Sched C instead of F? what I was referring to is LLC taxed as disregarded entity. T/P is concerned about personal liability, so, while not claiming to be a lawyer, feel Limited Liability Company would provide this, rather than opting to be S-Corp with all the additional requirements....taking reasonable salary, etc.

Your tax payer can have all the different things going on; it doesn't all have to be under the S Corp, just because it is a Business.

"Thoughts/comments - given limited info."

You know more about all of this than strangers on the internet know. You might also seek legal input, including the differences in risk and insurance for each type of activity. - Agree 100%, has current CPA for filing S, but further research and legal counsel is definitely the right approach.

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