If the entity changes, ie, S corp, the file needs to be started as that type when the entity changes. 

For example, I used to own RI Bookkeeping.  I was a sole proprietor (schedule C).  On July 1 (1999 - OMG!), I incorporated and became an S-corp.   I had to start a whole new file 7/1-12/31/1999 that business was an S-corp.  Jan-June 30, 1999 was filed as a sole proprietorship.  I had two tax business returns that year due my incorporating my business.  Different chart of accts. Too.