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Business changed type of organization from a sole proprietorship to an LLC. Does this get entered as a new and separate business from the sole proprietorship version on Schedule C?

Forum|Forum|3 years ago
June 24, 2022
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Current business is sole proprietorship but just got a LLC EIN and registered the LLC in our new state. Do we enter this as a totally separate business from the sole proprietorship business on Schedule C or just combine them on Schedule C?

https://sa.www4.irs.gov/modiein/individual/reason-for-applying.jsp

Changed type of organization

Select this option if you are changing the type of organization you currently operate, such as changing from a sole proprietor to a partnership, changing from a partnership to a corporation, etc.

Not A Product Question

Best answer by Anonymous_

If it is a single-member LLC (without an election to be treated as an S corporation for federal income tax purposes), then the LLC is disregarded, and your income and deductions are reported on Schedule C.

Simply put, the LLC is no different than a sole proprietorship for federal income tax purposes.

A

Anonymous_

Employee

@ponies2100112 wrote:

Do we enter this as a totally separate business from the sole proprietorship business on Schedule C or just combine them on Schedule C?

Since you mentioned "we", most here will presume that this is a multi-member LLC and, as such, the LLC will be required to file Form 1065 (if operating as a partnership).

See https://www.irs.gov/instructions/i1065#en_US_2021_publink11392vd0e555

If both members of this LLC are you and your spouse (and there are no other members), and you hold your interests in the LLC as community property in a community property state, then you have the option of filing two Schedules C (one for each of you).

See https://www.irs.gov/pub/irs-drop/rp-02-69.pdf

P

ponies2100112Author

Sorry it's a single member LLC.

Since it's a single member LLC do you need to create a new Business on schedule C or can the income and expenditures be mixed in with the sole proprietorship version of the business?

A

Anonymous_Answer

Employee

If it is a single-member LLC (without an election to be treated as an S corporation for federal income tax purposes), then the LLC is disregarded, and your income and deductions are reported on Schedule C.

Simply put, the LLC is no different than a sole proprietorship for federal income tax purposes.