Did you know most companies that convert a corporation to an LLC want the LLC to retain the historic employer identification number (EIN), but the EIN does not always carry over automatically to the LLC.
For new business startups, after you have your Employer Identification Number (EIN), you need to determine what type of company you want to be. More than anything this will affect you when you are doing your taxes.
We recommend forming a Limited Liability Company (LLC) because it combines partnership taxation or sole proprietorship with a corporation’s “limited liability”.
Additionally, for vehicle ownership, there is “limited liability” in the event of an injury or damage to property resulting from the use of your vehicle. If there is an accident and the vehicle is under an LLC, any lawsuit would have the same limitations as legal action against a corporation, meaning your personal assets are protected as long as the LLC is properly formed and structured.
Simply, in a LLC, personal assets are not subject to business liabilities and business assets cannot be seized in the event of a personal bankruptcy.
Starting a business into an LLC is simple. But transferring from one business entity to another can be complicated, especially if you are looking to divide your business into separate entities.
Before a LLC can claim ownership of a vehicle, the LLC must be formed according to the rules and regulations of the state where the LLC will be registered.
What does this look like when transferring from one businesses entity to a LLC in Pennsylvania? Let’s take a closer look.
Can you have multiple businesses under one LLC?
If you have a trucking business incorporated as an LLC but then later wanted to offer real estate services, can the owner provide both services under one LLC?
Yes, you can, where you operate under a “Fictitious Name Statement” or a “DBA” (“Doing Business As”) to operate an additional business under a different name.
However, there are downsides in doing this.
This option increases your liability and other risks. For example, if a lawsuit is filed against any one of the businesses, the assets of the others could be at stake.
Why divide your business into separate entities?
Today, most tax professionals, attorneys and business consultants recommend creating individual LLCs that are formed for every variant of a business.
Why? Because it will give you more options for:
- Liability protection
- Taxes
- Management structure (LLC may be either member managed, much like a general partnership, or manager managed, much like a limited partnership), and
- Transferability (This includes succession planning, the possibility of stock or asset sales)
The different parts of your business — the core business, the warehousing, the logistics fleet, the brokerage, and more — may have very different strengths, potential for liability and growth goals.
When establishing multiple LLCs, it can be extremely helpful to establish one parent LLC and create multiple sibling LLCs for each separate company entity.
While all the LLCs share the same holding company, and may possess similar structures, ownership interests, assets and liabilities, they are insulated and shielded from one another in order to protect the properties and resources of each individual LLC.
The advantages for separating trucking support business from your core business include:
- separating high-risk liability from the core business (this includes catastrophic accident, low-risk services at risk of high-risk services, excess insurance coverages, etc)
- similarly, protect your assets in litigation
- retention of key employees through ownership plans or bonus benchmarks tied to performance,
- filing taxes (gains and losses), and
- creates clarity for customers and business partners
- Make it easier to sell the business if you want to sell off one of the two business lines
Can vehicle plates be transferred when restructuring in Pennsylvania?
This all depends on how your business is currently set up. Let’s look at several examples of moving from one business entity into a LLC.
From Individual to LLC
Can plates be transferred? NO – Title Assignment. New plate must be purchased and sales tax is due.
From Sole Proprietorship to LLC
Can plates be transferred? NO – Title Assignment. New plate must be purchased and sales tax is due.
If you have a personal vehicle that is being used for business purposes, the vehicle can be transferred into the LLC with certain considerations.
Please note, moving private assets into an LLC for the sole purpose of preventing loss of assets in a personal bankruptcy is prohibited.
Steps to consider:
- Open a registered LLC in the state you do primary business operations in.
- Call your insurance agent as transferring the car to the LLC often comes with higher liabilities compared to personal usage.
- Contact the lender and get approval to move the car into the LLC if a loan balance exists.
- Prepare a Title Transfer where you will list the LLC’s full legal name as the new owner; sign the title request; and have it notarized. You will need the vehicle title and the LLC articles of organization.
If your vehicle is already paid off, you can sell your vehicle to the LLC for $1, just make sure you have the Bill of Sale to document this process.
From Partnership to LLC
Can plates be transferred? NO – Title Assignment. New plate must be purchased and sales tax is due.
From Corporation to LLC
Can plates be transferred? NO – Title Assignment. New plate must be purchased and sales tax is due.
However, most companies that convert a corporation to an LLC want the LLC to retain the historic employer identification number (EIN), but the EIN does not always carry over automatically to the LLC.
If you are converting a corporate subsidiary to an LLC, you must determine whether the EIN will be reassigned to the LLC before filing any state conversion document.
Why? Because if the historic EIN has been used on federal and state employment tax returns and to obtain state licenses and registrations, the economic cost of having to obtain a new EIN for the LLC could be substantial.
For example,
- Company’s payroll service may have to implement new databases for entities with new EINs, which can be time consuming and costly.
- If receives state Medicare and Medicaid reimbursements, any interruption of an EIN can cause significant delays in receiving these reimbursements.
From Two Corporation or Two LLC Forming NEW Corporation with NEW Charter
Can plates be transferred? NO – Title Assignment. New plate must be purchased and sales tax is due.
From Two Corporations or Two LLC Merging – adopting NEW name under Charter of one of original Corporations
If moving to Stock of both corporations or LLC’s owned by same parties, then YES with Name change on vehicles titles in name of Corporation whose name is retained and no sales tax due.
If not owned by the same parties, NO – Title Assignment. New plate must be purchased and sales tax is due.
Handle all Licenses and Permits at once
We have been handling our clients’ licensing and permitting needs for over 30 years. From IRP Licensing to IFTA Licensing to Title Management, we do it all.
If you think you need to visit the Department of Motor Vehicles (DMV), think again. We handle many of the same services as the DMV.
We offer several different services when it comes to titles including:
Let us get you started. Call (717)627.4334 or email at info@cnslicensing.com.
