Thinking about creating an LLC mid-year? Unsure about how it will impact you come tax-time?
That’s exactly what Lucy wanted to know!
By the end of this video, you’ll know:
- When becoming an LLC requires you to get a new EIN
- If creating an LLC mid-year creates tax headaches
- Common ways business owners make accounting simpler when switching to an LLC
Watch the video
- Want to go at it alone? Northwest Registered Agents is my go-to for those wanting to DIY their LLC. And using my affiliate link, they will submit your forms and act as your LLC’s registered agent for just $39! (Their usual price is $225). Grab this deal using this secret link.
- Leave your question for me to answer here
This week’s question comes to us from Lucy Jennings. Lucy asks,
Hello Kiff. Thanks for all the help you give us.
My question is that I would like to make my business be an LLC. It’s been a sole proprietorship for many years, and now it is in the middle of the year and I would like to change it over to an LLC.
I have an EIN number already, so what’s going to happen at tax time? Is it going to be all mixed up because I’ll have an EIN from sole proprietorship and also for when it is an LLC?
That’s the first question I’ve come up with so far becoming an LLC. So I hope that all the rest is going to be easy.
Thanks very much. And my name is Lucy Jennings and thank you for all your help.
Hey Lucy. Kiff here.
To answer your question, going from a sole proprietorship to a single-member LLC mid-year is something that a lot of people do. So you’re not in weird territory here.
It also isn’t a trigger for a new EIN.
New EINs are required when you go from a sole proprietorship to an LLC where there is more than one owner, that there’s more than one member, or when you’re going from a sole proprietorship to an LLC that’s taxed as an s-corporation. Then in those two instances, you do need a new EIN and it does add a little layer of complication come tax time.
But going from a sole proprietorship to a single-member LLC, that’s just a disregarded entity according to the IRS, which just means you do your taxes on a Schedule C just like you did before. That is not a trigger for a new EIN. And so that makes things a lot easier in the transition.
Some people like to do it at the end or the beginning of the month, you know maybe their paperwork comes back on the 12th but they don’t start running things through the LLC until the first. Or at a quarter transition, just for accounting purposes. But you can do it whenever that paperwork comes back.
And if you aren’t aware we do have a book that walks you step-by-step through the process of creating your LLC. And answering lots of questions that might come up as you go through the process. Buy your copy using our Amazon affiliate link here.
Or if you want to DIY your LLC, Northwest Registered Agents is my go-to! And using my affiliate link, they will submit your forms and act as your LLC’s registered agent for just $39! (Their usual price is $225). Grab this deal using this secret link.
So thanks so much for submitting your question. And I hope that that helps answer how your taxes will be impacted if you become an LLC mid-year!
Talk to you soon. Bye.
Hi! I’m Kiff! I’m your friendly legal eagle (and licensed attorney).
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