The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: muttonchops on April 06, 2015, 07:50:09 PM
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I need help!
I read the "Joy of Self-Employment" and got excited about starting a small business with my wife recently but I think my excitement has gotten us into trouble. I'll try to summarize what has transpired as succinctly as possible in bullet format:
- Got excited about starting a business
- Did some research (albeit less thoroughly than I should have) and settled on s corp entity type (I should have chosen LLC like MMM recommended)
- Chose a name for the corporation
- Applied for and received an EIN from the IRS, using the name and entity type we chose
- Incorporated the business in New York, where we live and will be doing business
- Realized about a week later that the name we incorporated under, while available in our state, is in use by a company providing the exact same type of service in a far away state
- Got worried about trademark issues, so we decided it would be best to change the name of the business
- Printed off, and filled in the corporate certificate of amendment (name change) form for New York. Snail mailed to the NY Department of State last week.
- Over the weekend, decided to look into accounting software
- Realized an s corp requires that an employee-shareholder be paid a "reasonable wage" and that the s corp has to make quarterly payroll and estimated tax deposits to the fed
- At this point we are thinking this is way more complicated than we wanted. We want to change the entity type to LLC since its accounting/paperwork requirements are far simpler and better suited for our skill-level in that area
- It turns out, NY is one of about 10 states that do not allow a simple "conversion" of a corporation to an LLC. We can either dissolve the s corp and form a new LLC (what we plan on doing) or form an LLC and merge the s corp into the new LLC (way more complicated than we want to deal with and no reason to do this, we have yet to conduct any actual business)
- Remember, we have an in-process name change underway. So we can't simply form the new LLC using that name and dissolve the s corp
OR CAN WE?
After that long explanation, the question at hand is:
Should we form the LLC while the corporate name change is being processed? As far as a I know, as long as the name is available at the time we organize the LLC, it will be granted. It is an online process so I believe it is instant. Hopefully, this would then prevent the corporate name change from being processed since that is done manually and will take time. When the person at the department of state tries to process the corporate name change, they should see that the name is unavailable (due to the new LLC) and deny the change.
My fear is that the corporate name change gets processed and then we cant organize the new LLC until after we have dissolved the corporation. In fact, there might even be a waiting period of 6 months, 1 year, or more before the name can be used again after the corporation is dissolved but I am not sure.
I tried calling the state to ask if they could cancel the corporate name change but they said there is no way to guarantee that the process can be stopped. They told me to fax the department that processes corporation documents and request the amendment not be processed. I did this earlier today but it is not guaranteed that will work.
I hope that makes sense. It is a confusing situation so if its unclear what is going or what I am asking, please let me know.
Thank you for any help!