1065 to 1120S

[ILLMAS]

I just took on a new client that had setup all its business filings before coming to me, after speaking to them the 3 partners want to have a weekly payroll. I informed them that they can take a guaranteed payment and not payroll because they are a partnership and need to file form 1065. Now my question, is there a way to change the entity with the IRS from 1065 to a 1120S, or would it be easier just to re-apply for a new FEIN. I called the state and they need to file articles of incorporation and close the partnership with the state.

Thanks

[jainen]

>>is there a way to change the entity with the IRS from 1065 to a 1120S<<

Yes, a sole proprietorship, partnership, or any entity can use the "Check the Box" regs to elect to be taxed as a corporation. Assuming they are eligible for S-status, they can file directly with Form 2553, or use Form 8832 to become a C-corp and elect S-status from there.

[OldJack]

>> entity can use the "Check the Box" regs to elect to be taxed as a corporation.<<

But electing to be a corporation does not solve the liability issue of a partnership. If they want to act like a duck why not be a duck. Liquidating a partnership is easy and contributing all the assets in exchange for corporate stock is tax-free so why not get it done the right way.