Discussion:Partnership or SMLLC
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Discussion Forum Index --> Advanced Tax Questions --> Partnership or SMLLC
Discussion Forum Index --> Tax Questions --> Partnership or SMLLC
| 7 November 2009 | |
| I have a tax client that operates a lawn mower sales and repair business. The business is formed as a Sub S Corp. The husband is the sole S/H of the S-Corp.The business is currently paying rent for the building it occupies to a third party.
The client has taken on a bank loan to purchase land and construct a new building.The Sub-S business will move into the new location and lease the building from the taxpayers (husband and wife.)No other third parties will be leasing space in the new building. The taxpayers want to shelter the new building and land from the Sub-S and to carry this out-a new entity will need to be formed. My first reaction was to set-up the new venture in a LLC and file a partnership return with the husband and wife as partners.However, per the instructions for form 1065 "Mere coownership of propety that is maintained and leased or rented is not a partnership". My second reaction is establish a SMLLC (Ohio) and report the rental activity on Schedule E.This is certainly a lot easier than completing a Form 1065/K-1's. The objective is to shelter the land and bulding from any Sub-S and personal liabilty Appreciate your feedback. | |
| 7 November 2009 | |
| The "mere co-ownership" method that can elect out of filing a 1065 is not a corporate entity that gives your TP any protection from liability.
If you are in a non community property state, an SMLLC will accomplish what you are looking for - protection and Sch E entry. If you are in a community property state, you can have husband and wife own the LLC and have protection and TWO Sch E entries (50/50?). | |
