Investing Outside of Wall Street – Changing an LLC name

*****Caveat: I am neither a CPA nor an attorney.  What is contained in the Investing section of this website is true from a business owner’s perspective in the state of Michigan as of each posting date ONLY.  It is entirely possible, therefore, that this may be a totally useless piece of information for you.  You are 100% responsible for the actions you may decide to take.  To ensure that you are conducting business within the bounds of the laws and regulations, I highly recommend that you consult qualified professionals in your state.*****

What We Did Right

This is turning out to be yet another one of my lessons-learned blogs; three more are added. But, first, here is an example of what we did do right.  If you’re new to entrepreneurship, I highly recommend the following:

1. Invite to a dinner meeting a CPA and an attorney, both of whom are highly-rated experts on the business into which you’re about to embark. The objective is to find out what type of entity is best suited for what you’re trying to accomplish.
   • You see, we chose to have them in the same room at the same time because we heard different, and sometimes conflicting, opinions from others who were already in the business. We needed to hear directly from the experts as to what was best for our situation.
   • What we did not want to do was to hear their inputs separately, decipher what we think we heard them say, and having to come to our own conclusion. We wanted a workable conclusion to be drawn by these two experts, on our behalf, by the end of the meeting.
   • For your peace of mind during the rest of your entrepreneurial career, I think such a meeting-of-the-minds-dinner event is money very well spent.
   • Today, we own and run different types of legal entities, depending upon the objective of each.
2. When you have gone through the first step, as noted above, I highly recommend using an attorney in getting at least the first few entities created. Learn everything you can about the process and requirements from that attorney.
   • In our case, as it turned out, our attorney was great at getting new entities established but NOT when it came to getting the existing LLC name changed to a new one – as you will see below.
   • Lesson learned #1 of 3: When it comes to your own business, ultimately, the buck stops with you.  Put another way, to get things done correctly, you need to (1) have, in the minimum, a cursory knowledge of how it is being done and (2) be able to figure out the right questions to ask when issues arise.
   • I hate to admit but it took me several years to figure this one out.  By taking this simple advice, you can potentially cut down the wasted time from years down to a few days.
   • For the most part, if you think through the obstacle that is in front of you in terms of “who, what, when, where, why, and how,” the right set of questions will emerge to help resolve the issue – like magic!

Changing an LLC Name

In 2006, we had one of our earliest LLCs created through an attorney.  For ease of understanding, let’s call this The Original, LLC.  Everything was taken care of by the attorney within a day or two.  Back then, I simply relied on him to get it done and did not ask what government entities were involved or how it was done.

Today, I do know.  In creating – as well as changing the name of – a Limited Liability Company (LLC), there are two major players involved in the following sequence:

1. At the State level: Where your entity is to be created.  (Hyperlinks are applicable only in Michigan.)
   1. Check to make sure that the desired name for your “entity to be” is not already taken by another company.
   2. If the name is available, file it with the State.
   3. Then have an operating agreement and/or any other necessary legal documents created.
2. At the Federal level: The Internal Revenue Service gets involved.
   1. Have the IRS issue an Employer Identification Number (EIN) for the newly created entity.

Fast forward to 2012, we needed an entity name for a new business venture.

1. Rather than create a brand-new one, however, we decided to change one of the existing entity names – The Original, LLC – which happened to be sitting idle.
2. All along, The Original, LLC was being kept active.  In other words, the annual statement was faithfully being filed with the state of Michigan and the annual fee paid.
3. Through our attorney, we had the entity name changed; let’s call this The Subsequent, LLC.
   • Because we had paid the attorney to get it done, I assumed that everything – from start to finish – was being handled correctly by him. This proved to be wrong.
   • Thereafter, during every tax-filing season, we faced an issue of incongruent LLC name vs. the EIN.
   • Several years later, when I figured out that the issue needed to be addressed both at the State and Federal levels, as noted above, I was finally able to ask the right questions.
4. While the name change was done correctly at the state level, the follow-up correction at the Federal level was never made by the attorney. In other words, every year for the next several years when the tax-filing time came, the IRS was not recognizing the new entity name.
   • Each year, we called the IRS.  No one at the IRS was able to direct us to the correct department that could answer our simple question regarding an EIN!?
   • Each year, our CPA suggested that we file the tax returns under the name of The Original, LLC.  For the sake of expediency to get the tax filing completed on time, we obliged.
   • This bothered me – a lot.
5. In November 2017, when our real-estate coach mentioned that anyone could call the IRS at (800) 829-4933 to get an EIN, I had a light-bulb moment.
   • I decided to call that number myself – to see if they could help us get the existing EIN officially associated with The Subsequent, LLC.
   • The response was positive.  At last!
     1. There is a letter called 147C, which confirms the transfer of the EIN from The Original, LLC to The Subsequent, LLC. I was told by the IRS agent that I’d be receiving the letter in a few weeks.
   • Months passed.  When I first placed the call, the agent mentioned her name and ID. I paid little attention to her identity disclosure because I did not think it was important.  A big mistake.
     1. Lesson learned #2 of 3: Every time you call the IRS, make sure to write down the agent’s name and ID. It helps a lot when you need to make follow-up calls – to get things done in a timely manner.
   • When I placed a follow-up call to the IRS in February 2018, they acknowledged the November 2017 request.
   • The first weekend in March 2018, we received the letter 147C. The transfer of the entity name was official.
   • Starting with the 2017 taxes, to be filed in 2018, the EIN and the entity name will finally match as they should have, but didn’t, for the last several years.

Lesson learned #3 of 3: As entrepreneurs, our primary focus is supposed to be on revenue-generating activities.  If not careful, it is easy to be distracted by issues that should be handled by others – such as those described in this post.  So, for me, blocking a solid time earlier in the day, to execute our core-business activities with no distraction, is imperative.

Happy investing!