Harlan Lunsford <hlunsford[at]BELLSOUTH.NET> wrote:
- quote -

In some states, perhaps. In other states capitalization is
not related to whether a corporation can be formed per se.
But after formation an undercapitalized corporation may not
be entitled to certain corporate benefits such as limited
liability.

- quote -

Perhaps in La, but not in Cal.

- quote -

Ah, California - where all the crazies go. ;-)

Stu

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Vernon Lee wrote:

- quote -

Yes. A lawyer might be able to help straighten this out,
since, as far as I know, you can't form a new corporation
with negative capital. With paid in capital in addition to
capital stock, yes.

Question. was capital stock actually issued when
corporation formed and was it actually paid for by the
stockholders? Without that having happened, I think a legal
ace would advise you that the corporation itself has not
been perfected.

Food for thought.

And why would you be talking with previous tax preparer
anyway? The owners themselves can simply bring in their past
tax returns. IF I were considering this case (and something
smells here), I would want to see past years business
returns; all of them.

Sort of reminds me a client years ago. He was proprietor of
a printing business, but for reasons not pertinant here,
left town, headed for California. When he left his wife
(who worked in the business) that Sunday night, he wrote
out a piece of paper words like ( I can't remember actual
wording) "I hereby leave the business known as xxxxxx
Printing Company to my wife, Axxxxxe, to include all the
equipment and supplies and the debts of the business."

ChEAr$,
Harlan Lunsford, EA n LA

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"Vernon Lee" <vlcpa001[at]postoffice.pacbell.net> wrote:

- quote -

Since an LLC is a non-recognized entity, were they filing
initially as a partnership? If not, how were they filing?
Assuming we're talking about material amounts here, I would
want enough facts to know how prior losses have been
treated...or at least reported...to avoid a basis problem
with the owners. Have they taken losses, therefore have a
negative basis? If you zero out that negative, how do you
report that in the new entity? Does the conversion to a corp
trigger a deemed sale?..etc.

Mike Lewis, CPA

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Took over new client that converted LLC with negative
capital to C corp. They started C corp GL with negative RE
and a shareholder note carried over from LLC. C corp has
only cash and intangibles(patent) as assets. Previous tax
preparer will not disclose if members of LLC took gain in
prior year. I think not enough - thus negative beginning
RE. Same owners in C corp as LLC.

My thought is to adjust the beginning capital to zero and
increase the patent. Someone out there have any other
thoughts.

--
Vernon L

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