Discussion:LLC "B" is single member of LLC "A"
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Discussion Forum Index --> Tax Questions --> LLC "B" is single member of LLC "A"
| 2 July 2007 | |
| Client has LLC that consists of one member - another LLC. Do you do a tax return for both or just the parent?
Thanks Jeff | |
| 2 July 2007 | |
| If B is a disregarded entity then no return is required for B. If A is also a disregarded entity then both LLC's will fold upward into the 1040 (if A is owned by an individual). | |
| 2 July 2007 | |
| Beware - states may have different requirements. In California, for example, if both A and B are doing business in California, then both must file Form 568 to report and pay the $800 minimum tax and the LLC fee.
In some states, a SMLLC may be disregarded for income tax purposes but may be subject to another entity-level tax, such as a net worth franchise tax or a gross receipts tax. Tennessee, Texas and Ohio are examples. | |
| 2 July 2007 | |
| Thanks Katie & Jim. Here in Florida we have Tangible Personal Property Tax that works in the manner you explained. I guess that from a Federal tax point of view, the members are the ones who have to prepare a return so for multi-level LLCs the LLC member would flow to its owners. I have a client who paid a consultant to set up a tiered LLC schema. I'm not sure why - he & his girlfriend are the only owners. The only thing I can think benefits is being able to bring in members to the various LLCs.
Thanks Jeff | |
| 2 July 2007 | |
| Another possible motive is to isolate the assets of LLC A from the claims of the creditors of LLC B and vice versa. That's the purpose of the "series LLCs" created by Delaware and some other states so that it isn't necessary to form multiple LLCs to get the same result.
Of course, making LLC A the single member of LLC B may, at least partially, defeat the purpose. Creditors of B may not be able to get at A's assets, but creditors of A might be able to sell B's assets (Ashley Albright, 291 BR 538, Bankr. D. Colo. 4/4/03.) I'd ask the attorney, just out of curiosity, why the structure was set up this way. | |
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