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shadow
01-26-2009, 01:17 PM
I did have this posted at the other site but nothing was going on so...

I have a landscaping business in MI currently registered as a DBA. This year i am hiring an employee or two. I am wanting to convert to an LLC for help with liability protection for my employees activities.

my question is about the conversion process. do i transfer all ownership for equipment and such to the LLC? also any outstanding debts like credit cards and truck loans? how do i go about this process? do i include it in the articles of organization for the LLC that the LLC will take over any outstanding debts from current DBA?

does all this matter even though i am registering as a single member LLC? ie sole owner or responsible party

__________________________________________________ _________

or another thought...

could i start a seperate LLC and transfer the current DBA to the LLC to be managed, as i could also with my other DBA's which i have two more of? or would this cause problems during tax time?

the way i understand it is anything the DBA's make can be "drawn" from the accounts by the LLC and only taxed once because it would all be my money anyway...yes no? like "moving from one pocket to the other" as ive heard so eloquently put here at this forum before.

is this even legal? i guess i would like to be more organized by having seperate DBA's which i can keep track of profit/loss more effectively and funnel the money into one LLC to which i could use to pay my bills and what not. ie John Smith LLC......

is this effectively organizing or just complicating things to much?

Business Attorney
01-26-2009, 04:02 PM
If you form a single member LLC to operate your existing business, you should transfer all the assets and liabilities of the existing business to the LLC. Since the single member LLC is ignored for federal tax purposes, the transfer has no tax consequences.

As to currently existing liabilities, the transfer will not relieve you of the personal obligation to pay your business' creditors. Still, they should be transferred along with the assets. I believe that keeping all of the assets and related liabilities together helps to establish the separate existence of the LLC in the event it is challenged at a later date.

Normally the transfer is not specifically mentioned in the articles of organization, though I suppose it could be. I would just do a simple document that I call an assignment and assumption agreement (essentially a bill of sale on steroids). The document doesn't need to be notarized, but a notary or other witness will help establish that you made the transfer if anyone later claims that you backdated the document.

I'm not sure I understand what you are getting at in the second part of your post, so I'll stop here...

shadow
01-26-2009, 04:48 PM
so i could transfer debt/assets its just i personally would still be liable if anything would occur.

how would consolidating the debt be treated if say the new LLC paid off debt from old DBA with a loan? im not trying to do anything fishy, just trying to make sure it would be legal.

the second part was concerning having my three DBA's under a main LLC. ie John Smith LLC "doing business as" John's Trucking. this would be for liability purposes of course from debt and employee's.

i guess the question was since the LLC is a pass through entity and so would the DBA's under the LLC name would this be taxed only once in the normal manner? i would have the DBA's taking care of their debt and then the profit would go to my LLC which i would use to pay my normal personal stuff. does this still offer the protection benifits the LLC offers?

so many questions i apologize. just trying to get some thoughts straight.

Business Attorney
01-26-2009, 09:59 PM
The transfer does not change the fact that you are personally liable for the debts that were created when the business was a sole proprietorship. It makes sense. You can't unilaterally change the relationship between you and another party.

An entity operating under an assumed name is still just the entity, just as a sole proprietorship operating under an assumed name is still just the person behind the sole proprietorship. The name is just a name.

Evan
01-26-2009, 10:48 PM
As your entity is going to be new, almost all of your loans/credit cards will have a personal guarantee that if the LLC flops, you'll pay for it yourself.

shadow
01-27-2009, 06:59 AM
As your entity is going to be new, almost all of your loans/credit cards will have a personal guarantee that if the LLC flops, you'll pay for it yourself.

if i transfer the DBA to an LLC will i still have the accrued credit from previous or is it a start from scratch situation period.

Business Attorney
01-27-2009, 10:35 AM
That may vary from one credit card issuer to another. I would suggest that you check with the company. If it is based on your personal credit history, it seems that most companies would give you the same credit as before.