Should I change from an S Corp to a Sole Prop?

[justsomeguy]

What is the name of your state (only U.S. law)? CA

Ok, I've had an S corp for years, currently my biz has turned into more of a part time hobby than my main source of income, I'm making a couple grand a month probably.

I am going through a bankruptcy and have no assets I'm worried about protecting. As an S corp I'm required to pay $800 a year to California for the privilege of being a business here. If I'm a sole prop, I don't have to.

I don't think I'll be saving more than $800 in Taxes as an S than I would as a Sole prop? I don't "think" and I'm not worried about the legal protection for now as I don't have anything to worry about losing.

Am I missing something?

 

[Zigner]

I think what you're missing is a legal question...

 

[tranquility]

You can't just disappear an S-corp. You have to dissolve it. There are many guides out there. Also, depending on the facts, there could be tax implications as well during the distribution of the assets and carryforwards. If the corp has good credit and is long-standing, you might think about selling it. People might want to use it as a shell.

 

[justsomeguy]

You can't just disappear an S-corp. You have to dissolve it. There are many guides out there. Also, depending on the facts, there could be tax implications as well during the distribution of the assets and carryforwards. If the corp has good credit and is long-standing, you might think about selling it. People might want to use it as a shell.

I would go through the process of dissolving it. and would go about all legal requirements to transfer what little assets I have to me as an individual. My question is, are there any reasons why it would be a bad idea? The only one I can come up with is that if the business picks up again in some way, I will probably want to re-incorporate again down the road, but that's a gamble at this point i think I'd be ok with providing there aren't some other reasons to keep it that I'm missing?

 

[tranquility]

-There is value in a long-standing corporation with good credit.
-There could be tax consequences to dissolution.
-There is work involved with dissolution.
-You might have a lack of continuity of knowledge of your services.
-You might have to register things differently.
-Any of a number of things depending on the facts of which we have none.