I run a small landscaping LLC in Indianapolis and I'm considering switching to an S-corp for tax reasons. What actually happens when you change legal structure? Do I need new licenses, re-register with the state, notify clients? Any pitfalls I should know about?
Legal Structure
What happens if my Indianapolis business changes its legal structure?
Changed my microbrewery from a sole prop to an LLC a couple years back. Indiana makes you file articles of conversion, but the SOS website is actually decent. Biggest hassle was the bank and the alcohol permits
LLC to S-corp isn't really a change of legal structure – you're electing a tax status. The LLC stays. You file IRS Form 2553. I think a lot of people conflate these.
Not a lawyer, but I remember reading that if you actually convert from one entity type to anotther in Indiana, you might need to get a new EIN? Or maybe not. Someone here probably knows.
New EIN usually only if you incorporate or change tax classification, but check with the IRS. You can often keep your old one. Don't quote me though.
Yeah we kept our EIN when we converted. The SOS gave us a new new business ID number though, which was fun to update everywhere.
Your clients probably won't care unless your contracts name the old entity. If you signed a bunch of multi-year landscaping deals as an LLC and now you're something else, you might need to assign those contracts. That's the kind of thing that bites you later.
Also, if you have a business personal property tax filing in Marion County, the entity name on that needs to match. The assessor's office can be a pain if it doesn't.
Why would you want S-corp for landscaping? The payroll requirements and reasonable salary stuff can be a headache for a small operation. What's the actual tax savings you're projecting?
Self-employment tax is eating me alive. I net about 90k and I'm paying both halves of FICA on all of it. My CPA says S-corp could save me maybe 6-8k a year.
Fair enough. Just make sure you run the numbers with the added payroll service costs and the extra 1120-S filing. It's not free.
lol @ 'self-employment tax eating me alive.' welcome to small business ownership. it's basically a pie-eating contest where the prize is more pie.
One thing I haven't seen mentioned: if you have a registered agent, make sure they know about any name changes. Same with your insurance company. Our GL policy had to be reissued.
Also update your DUNS number and any local permits with the city. Indianapolis licensing can be weird about the name on the permit matching the legal entity exactly.
Honestly the biggest surprise for us was the banks. Even though it was technically the same company, they wanted a new resolution and updated docs. Took like three weeks to get access to our own money. Plan for that.
And don't forget the BMV if you have titled vehicles for the business. We had to retitle our work truck.
At the end of the day, the actual conversion filing in Indiana is cheap. It's all the downstream admin that costs you time and money. I'd say budget a full month of headaches.