Discussion:Can Two S-Corps own an LLC?
From TaxAlmanac
Discussion Forum Index --> Tax Questions --> Can Two S-Corps own an LLC?
| 13 November 2006 | |
| I currently have an S-Corp and my dad has an S-Corp that each is an owner of XYZ LLC. All Income and expenses flow through to each member S-Corp based on their percentage of ownership. At the S-Corp level we each take our portion of the expenses from the LLC and pay ourselves our salary and draw. Is this an OK structure? If so what filings do I need to make? | |
| 13 November 2006 | |
| Yes. S corps have limitations on who may be shareholders of the S corp, but there is no provision that prohibits an S corp from being a partner/member in an LLC. Tax filings required by this structure are:
1) Three sets of books. 2) Form 1065 for LLC 3) Payroll tax returns for S corp (quarterly Form 941, annual Form 940, possibly quarterly state industrial insurance and possibly quarterly unemployment insurance, depending on whether you have other employees and whether officers of S corps have elected coverage or not) 4) Form 1120S for each S corp. 5) State income or excise taxes, depending upon where you are. A much simpler structure would be either a single LLC in which father and son are each members, or a single S corp of which father and son are both stockholders. Would greatly reduce your administrative burden. Have you met with a tax professional to discuss your options? | |
| 8 December 2006 | |
| If that is the case can a single S Corp own 100% of an LLC "AND" elect for that LLC to be treated as a C Corp? | |
| 8 December 2006 | |
| Yes, an S corp may be a shareholder/owner of C corp, but the reverse would not be true, a C corp could not be a s/h of an S corp. You may want to think this through carefully, however. May not be the best structure. | |
| 8 December 2006 | |
| I have a sub S corp which has a web hosting business and a real estate brokerage in it. I've been considering splitting them apart. I've also got an online venture I am considering launching in the near future and am wondering about a corporate structure for that. My spouse and I are the sole owners of everything and will continue to be. (That's our plan anyway) Any thoughts or opinions would be appreciated. | |
| 8 December 2006 | |
| Option 1, leave all 3 businesses inside one S corp shell. If desired, separate the 3 businesses into 3 separate LLC's in order to insulate liability. A single-member LLC that does not make an election to be taxed like a corporation will be a "disregarded entity" meaning for tax purposes all three businesses would consolidate onto one 1120S.
Option 2, set up each business in separate corporations. Elect C or S status depending on a number of factors. Option 3, set up each business in separate corporations and make one a parent corporation owning 100% of the others and make a QSUB election so that the corporations are disregarded for tax purposes and consolidated all into one S return. (Similar to option 1 only using separate corporations rather than LLC's to accomplish essentially the same thing). Option 4, go see a tax professional that can assist you in figuring out which way is the best way in your particular circumstances based on more info than we have available in this forum. (This is my recommended course of action). | |
| 10 January 2007 | |
| I appreciate your assistance. What we are planning to do for the moment is:
1.Setup a new parent corp (Sub S) which wholly owns the existing Sub S corp,and put the web hosting business into an LLC wholly owned by the parent corporation. Parent Co (Sub S) Sub S LLC R.E. Business Web Hosting Business That should be okay, right? | |
