Discussion:SMLLC owned by S Corp
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Discussion Forum Index --> Tax Questions --> SMLLC owned by S Corp
| May 14, 2008 | |
| An S-Corp owns 100% of an LLC. The LLC is disregarded and reports on the S-Corp return. (Previously, the LLC was owned by an individual and reported on Sch C.)
My question is, how do I report the LLC activities on the 1120-S? Option 1: show a single line of income (Income from ABC, LLC) and show a single line of expenses (Expenses from ABC, LLC. This doesn't seem like enough detail. Option 2: make a journal entry in the S-Corp books showing each line of income and expense (per the LLC Income Statement), and report the functional categories of expense on the 1120-S combined with the other S-Corp expenses. Option 3: ??? Thanks, | |
| 14 May 2008 | |
| 3. keep consolidated schedules outside of the S-Corp books for tax and reporting purposes. This give you the ability to know the stand alone numbers of each and have the consolidated amounts for the tax returns/financials.
I'd probably do it the way I suggested or if the amounts don't matter or there is no need to track them separately I'd do 2. 1 is overly simplistic and could be misleading if the returns were later used for financing or for sale of the business. | |
| May 14, 2008 | |
| I was going to suggest using QB for classes, but it doesn't legally respect the entity issues of separation.... | |
| 14 May 2008 | |
| I think you must keep separate, detailed accounting records for the SMLLC if it is to have any liability protection value as a separate entity. (It may not have much under the best of circumstances.) Then as UTdave suggests, you prepare consolidating statements (columns for S Corp, SMLLC, Eliminations, Consolidated) that underlie the 1120S, which shows the consolidated numbers.
You really have two separate entities here and each must have its own books and records. The SMLLC is disregarded only for income tax purposes. | |
| May 14, 2008 | |
| Thanks for the reponses.
Currently, the LLC and the SCorp are separate QuickBooks companies. So the detail for each is maintained. With support for the above comments, I plan to enter the detailed activity of the LLC as a journal entry in the SCorp. I can use the same or different accounts as needed, and still maintain the detail I would have had on Schedule C, or if the activity had been reported on a K-1. That way flow-thru items such as charitable contributions, meals & entertainment, etc., will stay separate as they should Thanks again | |
| 15 May 2008 | |
| For tax reporting purposes, disregarded entities are treated as a department within the corporation and not segregated on the 1120S. If it's a rental activity, you use Form 8825, of course. | |
| 24 September 2008 | |
| What would be payroll consequences of this situation? Would all the payroll be paid out of S-Corp EIN or would you have to pay some employees out of LLC EIN? | |
