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Merging two of my LLCs.... What do I need to do exactly?

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Hi there!

Here's my situation:
LLC "A"...... taxed as an S-Corp (I run payroll, etc).... makes about $40k/year in royalties
LLC "B"...... plain-ole LLC (pass through).... makes about $70k/year in royalties

Here's what I want to do:
I want to move all the assets from LLC "B" into LLC "A", and fully dissolve LLC "B" so that all the royalties are under the S-Corp and I only have to deal with one payroll, one tax return, etc.

My Question:
Other than submitting the state's LLC dissolution paperwork, is there anything else I need to do?

For example:
1) Do I need to officially "sell" the assets from LLC B to LLC A? If so, can I set the sales price at whatever I want it to be? (For example, $1?)
2) Do I need to do anything at the federal level, for example do I need to close down my EIN number somehow? (If so, how?)
3) Do I have any tax liabilities at the federal level? Since LLC B was always a pass-through entity, the income shows up only on my personal return anyway, and of course I'll continue to file a personal tax return each year.
 


Zigner

Senior Member, Non-Attorney
The advice of (this member of) this forum is to seek the assistance of a tax pro.
 

quincy

Senior Member
Hi there!

Here's my situation:
LLC "A"...... taxed as an S-Corp (I run payroll, etc).... makes about $40k/year in royalties
LLC "B"...... plain-ole LLC (pass through).... makes about $70k/year in royalties

Here's what I want to do:
I want to move all the assets from LLC "B" into LLC "A", and fully dissolve LLC "B" so that all the royalties are under the S-Corp and I only have to deal with one payroll, one tax return, etc.

My Question:
Other than submitting the state's LLC dissolution paperwork, is there anything else I need to do?

For example:
1) Do I need to officially "sell" the assets from LLC B to LLC A? If so, can I set the sales price at whatever I want it to be? (For example, $1?)
2) Do I need to do anything at the federal level, for example do I need to close down my EIN number somehow? (If so, how?)
3) Do I have any tax liabilities at the federal level? Since LLC B was always a pass-through entity, the income shows up only on my personal return anyway, and of course I'll continue to file a personal tax return each year.
You didn't mention the name of your state or the states involved. If you are in the US, the state(s) matter.

That said, I agree with Zigner. You will want to seek out professional assistance in your area. The assistance you need requires a personal review, which we can't do on a forum.

Good luck.
 
The state is Wyoming. I believe my question is still general enough to get at least some advice here.... I'm not looking for a perfect answer, and I will eventually hire a professional. Meanwhile can somebody please tell me what you THINK is the answer? Thanks!
 

Zigner

Senior Member, Non-Attorney
The state is Wyoming. I believe my question is still general enough to get at least some advice here.... I'm not looking for a perfect answer, and I will eventually hire a professional. Meanwhile can somebody please tell me what you THINK is the answer? Thanks!
Wow, so you want random guesses that may (or may not) cause you to act in a manner that is contrary to what you should do, just because you're, what, impatient?

Talk to a pro!
 
SMH..... Isn't that the point of a forum? If you don't know the answer, no need to reply to the question. The whole "talk to a professional because I don't know the answer" response is not necessary, as it's already an obvious advisable course of action. Please just let somebody else reply that MAY know, and then I will use my best judgement in choosing what action path to take.
 

quincy

Senior Member
The state is Wyoming. I believe my question is still general enough to get at least some advice here.... I'm not looking for a perfect answer, and I will eventually hire a professional. Meanwhile can somebody please tell me what you THINK is the answer? Thanks!
Thank you for providing the name of your state.

We actually strive on this forum to provide posters with perfect answers. :)

And we are reluctant to guess.

Because our guesses would be of little benefit to you, you are better off with a personal review of all facts.

But, here is a link to Wyoming's Limited Liability Company Act:

https://soswy.state.wy.us/Forms/WyoBiz/Wyoming_Limited_Liability_Company_Act_and_Close_LLC_Supplement.pdf

The Act tells you what you need to do to dissolve an LLC and how to merge two LLCs.

A professional in your area can help you accomplish your goals based on the specific facts.

Good luck.
 
Thank you for the link.

I appreciate where you're coming from in being reluctant to guess, but I wasn't asking someone to guess... I was asking for someone who truly believes that they know a thing-or-two about this topic to chime in. I'm pretty sure I'm not the first person to try to merge two companies together!

You may be assuming that asking a question like this on a forum means that I'm trying to take a shortcut or cheap out on paying for professional advice. But you should consider that perhaps I'm trying to become more informed before reaching out to my tax attorney, so that I have a better / more detailed set of questions to ask him.

So please...... less judgement and scolding.

My personal approach in forums like this one........... If I don't know the answer, then I tend to stay silent and let someone else (who might know the answer) take a stab at it.

There's really no point in telling somebody to ask a professional. Everybody already knows that's the best course of action, and yet have still chosen to post on the forum for their own reasons.
 

Taxing Matters

Overtaxed Member
My Question:
Other than submitting the state's LLC dissolution paperwork, is there anything else I need to do?

For example:
1) Do I need to officially "sell" the assets from LLC B to LLC A? If so, can I set the sales price at whatever I want it to be? (For example, $1?)
2) Do I need to do anything at the federal level, for example do I need to close down my EIN number somehow? (If so, how?)
3) Do I have any tax liabilities at the federal level? Since LLC B was always a pass-through entity, the income shows up only on my personal return anyway, and of course I'll continue to file a personal tax return each year.
There are several ways you could do it. In most cases, I would recommend to a client that they simply contribute the member interests in LLC B to the S-corporation (LLC A) and then do the dissolution of LLC B following the rules in state law for that. For the contribution, typically all you need is a contribution agreement and the approval of the members of both LLCs of the contribution agreement recorded in their respective company records. If any of the assets are titled assets, of course the necessary documents (deed, vehicle title, etc) would need to be executed as well. For federal tax purposes that will look like simply a contribution of the assets of LLC B to the S-corporation. If you own all the shares of the S-corporation that contribution will have no immediate tax consequence. The transaction is not taxable and the S-corp takes the assets of LLC B with the same basis you had in them prior to the transaction. Depending on the details of both businesses, it is possible that some other transaction might be more beneficial here, so you might want to see a tax attorney if you are unsure of what you want to do. The attorney should know both the tax aspects of this and what your state law will require for the dissolution, etc.
 

Whoops2u

Active Member
There's a guy who used to make, literally, thousands of flowcharts that gives the process to answer many questions like this. I believe he is an "international tax attorney" now. One place I might look is Sections 701 - 776 Parnerships / Subchapter K for some of the issues to consider.
 

LdiJ

Senior Member
The state is Wyoming. I believe my question is still general enough to get at least some advice here.... I'm not looking for a perfect answer, and I will eventually hire a professional. Meanwhile can somebody please tell me what you THINK is the answer? Thanks!
Ok, I am a tax professional and in my opinion, you should rely only on advice from someone you pay for a consultation. Your situation is too complex for a free internet forum.

However, I will tell you that you will have to file a final tax return for the entity that you dissolve...even if that tax return is all zeros. It should not be all zeros, but even if.
 

Taxing Matters

Overtaxed Member
However, I will tell you that you will have to file a final tax return for the entity that you dissolve...even if that tax return is all zeros. It should not be all zeros, but even if.
The entity to be dissolved is a disregarded entity; there is no income tax return to file for that entity. He may need to file a Schedule C for the last year that he holds the LLC directly and indicate it is the last one however.
 

Taxing Matters

Overtaxed Member
One place I might look is Sections 701 - 776 Parnerships / Subchapter K for some of the issues to consider.
Except that there are no partnerships involved here. One is a S-corporation and the other entity a LLC that is presently treated as a sole proprietorship of the OP. Partnership taxation is distinctly different from from the rules for S-corporations and sole proprietorships.
 
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