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Discussion:LLC Owned by S-Corp

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Discussion Forum Index --> Basic Tax Questions --> LLC Owned by S-Corp


Discussion Forum Index --> Tax Questions --> LLC Owned by S-Corp

Kareneemery (talk|edits) said:

27 February 2008
Hi, all. Just want to be clear before beginning work for a new client. He has an S-corp with two shareholders and an LLC that is 100% owned by the S-corp. (Or 100% owned by himself, personally. I don't have a clear answer on that from him yet. Sounds promising, no?) Assuming the LLC is 100% owned by the S-corp, and since it's a disregarded entity, do I need to separate its activity from the S-corp's activity when I prepare the 1120-S? Or do I just combine both entities? Or is there some other way the LLC should be reported? I have read that some prepare a partnership return just so that they can issue a K-1 to the S-corp, but that seems odd to me. (Naturally, the activity is combined on the books for the majority of the year!)

Thanks so much for your help.

RoyDaleOne (talk|edits) said:

27 February 2008
You don't need to separate the LLC activity in the 1120S, just properly classify the income and expenses.

Kareneemery (talk|edits) said:

27 February 2008
Woohoo! That's good news. Thanks!

Kareneemery (talk|edits) said:

10 March 2008
Well, heck, I'm back again, still thinking about this one. If I don't separate the LLC activity from the S-corp activity, but file them together on the S-corp return, what will alert the IRS and state agency that the LLC has filed correctly? It has its own EIN, so they'll be looking for some kind of return with that EIN, no? Still confused by this, I guess.

Thanks.

Www.cpa1.biz (talk|edits) said:

25 November 2012
I wanted to bring this topic back up from Karen.

I too have a client who owns has an S corp that owns 100% of a SMLLC that is a disregarded entity. The SMLLC had clients so I was wondering how a W-9 needs to be filled out. If the client fills out the W-9 to show the SMLLC's EIN number, the IRS may see this 1099 in their system but there would be no tax return filed under the EIN since that SMLLC tax return is included in the S corp's tax return.

I am thinking that the client give the W-9 filled out with the S corp's EIN number and show the name of the disregarded entity in the second line of the W-9. It would Not show the EIN number of the disregarded entity. Please let me know if you agree to this method of filling out the W-9.

Thank you, Brian.

Harry Boscoe (talk|edits) said:

25 November 2012
I may be too little and too late, but it seems to me that if the LLC was created to provide some liability protection [uh, like, what else would it be for...?] then it will *lose the ability* to provide that protection if the books, records, cash, assets, liabilities, indeed anything that can be separated, of the LLC and its single member, the S corporation, aren't kept rigorously separated. If this segregation of identity and assets, etc., is not maintained, there's no reason for having the separate entity.

Yeah, it's a "disregarded" entity, for tax purposes, but it's still a very distinctly separate legal entity, and has to keep that separate identity, for *legal* purposes.

IANAL.

Pegoo (talk|edits) said:

26 November 2012
You can still keep two sets of books and merge them together for tax purposes. In quickbooks, you can set classes on accounts, and on Peach Tree, you can just merge them on reporting. As for liability, it does not mean creditors can not come after you... Most creditors and vendors businesses deal with requires personal guarantees as part of their credit terms nowadays (as your restaurant clients). As for tort liability, if your LLC or INC is to be found insufficiently capitalized, courts may pierce that veil.

Www.cpa1.biz (talk|edits) said:

26 November 2012
All, I was following up on this question about which entity fills out he W-9 for its client: I am thinking that the client give the W-9 filled out with the S corp's EIN number and show the name of the disregarded entity in the second line of the W-9. It would Not show the EIN number of the disregarded entity. Please let me know if you agree to this method of filling out the W-9.

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