Procedure when a business changes from sole proprietor to a corporation. What must one do ?

[Guest DIGMYDOG]

When a business changes from a sole proprietor to a corporation, exactly what needs to happen in terms of the profit sharing plan?

I have a client that has changed to a corporation effective 1/01/05. They have a new employer id number. Everything else is the same (profit sharing plan with no 401(k) provision).

Do we need to terminate and file the final 5500 for the sole proprietor plan, then establish a new plan under the corporation? Must we physically transfer funds to a new account registerred under the corporation? Are there any forms we must submit with the DOL or IRS?

Guidance on this matter would really be appreciated.

Thanks!

[WDIK]

I would think that a plan amendment changing the sponsoring employer would be sufficient.

[mbozek]

If the plan permits adoption by a sucessor employer then you need to have the corp adopt the plan and change the sponsor to denote the name of the corp. Need to notify the trustee/custodian of the change.

[Appleby]

mbozek's post is similar to our process. In addition to the new adoption agreement, we ask for an accompanying letter, explaning the change.

[wmyer]

When you file the 5500, there is a space for a change of EIN. The plan name will presumably change as well, since it will be Something, Inc. The 5500 will also no longer have code 3B on it (plan covering self-employed individuals).