How to Switch From Sole Proprietorship to S Corp in QuickBooks
By Jeff Grundy
Many business owners start their companies as sole proprietorships because they are easy to set up and license. As a business grows, however, some will elect to incorporate and establish S corporations. Doing this limits the owners' personal liability and provides tax benefits not available to sole proprietors. If you have just converted to an S corporation and you use QuickBooks, the program does not let you change your business structure after initial setup. A simple workaround is to create a new company based on the S corporation structure and then import all of your ledgers and transactions from the sole proprietorship.
Export Data From Sole Proprietor Company
Open QuickBooks. Click "File" on the menu bar and select "Open." Browse to the folder containing your QuickBooks sole proprietorship file. Highlight the filename and click "Open." Depending on your QuickBooks settings, your company file may open automatically.
Click "File" on the QuickBooks menu bar and select "Utilities." Click "Export" from the drop-down list.
Click the "Lists to IIF Files" option and select "Chart of Accounts, Customer, Vendor and Lists."
Click the "OK" button to export the data from the QuickBooks sole proprietorship file and save it as an IIF file. QuickBooks saves the IIF export file in the same folder as the original company data file.
Create Blank Company File for the S Corp
Click "File" on the menu. Select "New Company" and click "Express Start."
Type your business name and industry in the provided fields. Choose "S-Corporation" as the company type and click "Continue."
Enter contact information for the new S Corp business and click "Create Company File."
Click the "Start Working" button and wait for QuickBooks to create accounts for the S Corp company file.
Click "Lists" on the menu bar, and then click "Chart of Accounts." Select the first account name in the list and click the "Accounts" button.
Click the "Delete Account" button and "OK." If a popup message appears warning that you cannot delete the account, click "OK," then click the "Accounts" button again. Select "Make Account Inactive." Delete or make inactive all of the accounts in the list.
Import Data From Sole Proprietorship Company File
Click the "File" option on the menu and select "Utilities."
Click "Import" on the drop-down list. Select "Lists to IIF Files..."
Browse to the IIF export file created for the sole proprietor company. Highlight the filename, then click "Open" to import and copy the information from the sole proprietor company file into the new S Corp data file. Use QuickBooks for the new S Corp company as you normally would.
The above method works with 2013 versions of QuickBooks Pro, Premier and Enterprise and may vary in older versions.
Jeff Grundy has been writing computer-related articles and tutorials since 1995. Since that time, Grundy has written many guides to using various applications that are published on numerous how-to and tutorial sites. Born and raised in South Georgia, Grundy holds a Master of Science degree in mathematics from the Georgia Institute of Technology.