Another comment on Do you need separate entity or dba - sub S or C corp February 28, 2025
KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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Another comment on Do you need separate entity or dba - sub S or C corp
February 28, 2025
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Another comment on Do you need separate entity or dba from article on February 15, 2025
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Ken,
Thanks for the positive shout out about my being able to help a Seller that is a C Corp avoid double taxation on the sell of an alarm company. You are correct that it is a complicated process, and it still doesn’t completely accomplish the purpose, and it runs up a lot of accounting, and legal, fees.
The best way to approach the sale of most alarm companies is for the Seller to be an S corp. I say, it, you say it, and I still run into alarm companies that are C Corporations. When I see an alarm company that is a C Corp. it is most likely because their accountant doesn’t understand the value of RMR. Electing to be an S Corp is fairly simple, but, keep in mind that the RMR can’t be sold without being taxed twice (Built in Gains) for five years after the S Election. If you are a C Corp look into converting to an S Corp and do it now.
Mitch Reitman
817 698 9999 XT 101
Reitman Consulting Group
Fort Worth, TX 76133
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Response
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Other than a very large company I can't think of a reason an alarm company would be anything other than a business corporation with an IRS subchapter S election. While there apparently is a way to convert from C Corp to S Corp, it may be easier to re-incorporate as an S Corp and take over the accounts. That may work for a small company; less so for a larger one. A mess you could have and should have avoided when you first incorporated.
Other than the tax status election the question of multiple entities was raised. The simple answer to that is that unless you are prepared to completely separate your entities you likely won't accomplish whatever benefit you hoped for when creating the multiple entities.
Maybe the best advice for someone going into alarm business, before they do anything, join the Concierge Program and use it. Things should go smoothly after that.
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