Discussion:Limited Liability Company
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| 9 December 2005 | |
| Have a new LLC. It is 100% owned by a corporation. The corporation is 100% owned by an individual. It appears by default the LLC will be taxed as a C corporation. It cannot make the S election as I understand it and it appears the LLC will file a form 1120 or a consolidated return with the corporation that owns the LLC. Is that correct? Also, it appears the corporation that owns the LLC could make an S election, but don't know how beneficial that will be. Both entities are dental practices. Any comments? | |
| 9 December 2005 | |
| 1) An S corp cannot have a C corp as a shareholder; therefore, it cannot make the S election.
2) The LLC is a single-member LLC (SMLLC). By default it is a disregarded entity. The LLC can elect to be taxed as a corporation. If the election is made, it will file as part of a consolidated 1120 with the parent company. If it does not make the election, it does not file a separate 1120 as it is "part of" the parent company. 3) For state tax purposes, it may have to file a separate return. Here in CA, if the LLC was a disregarded entity, it could file a separate and complete state tax return and exclude its income from the 100%-owner's CA return *OR* it could file a separate abbreviated tax return and sign a statement representing that it will include it's income on its 100%-owner's CA tax return. I see from your profile that you are in AZ. If the LLC has nexus with AZ or is an AZ LLC, then it is treated the same fo AZ purposes as for federal purposes. See Arizona Corporate Tax Ruling CTR 97-2. 4) I cannot comment on the efficacy of C- versus S-status of your client's corporation. | |
| 9 December 2005 | |
| PGattoCPA is correct, but I would like to slightly modify part of his statement. He says "If the election is made, it will file as part of a consolidated 1120 with the parent company." This may be a little misleading by saying "it will file," because a disregarded entity does not file for federal purposes, and the parent doesn't file a consolidated return, per se. The LLC is just included as a regular part of the parent's operation with no mention of it being a consolidated return. A better wording would be "If the election is made, it is a part of the parent's 1120." | |
| 9 December 2005 | |
| Tonypa:
I believe you misread my post. My post fully states, "By default it is a disregarded entity. The LLC can elect to be taxed as a corporation. If the election is made, it will file as part of a consolidated 1120 with the parent company." So, if the election is made to treat the LLC as a corporation, then it will indeed join in the filing of the consolidated T/R. *By default* the LLC is a disregarded entity. Therefore, no election is required for it to remain a disregarded entity. Thus, if *no* election is made, then the LLC is part of the parent's 1120. | |
| 15 December 2005 | |
| Thanks for your responses. OK. I understand the disregared entity rules. By default the LLC activity will show up on the owner corp's tax return. What I don't know at this point is if the owner corporation can make a Sub S election. Anyone have any ideas? | |
| 17 December 2005 | |
| A sub s corp can own a subsidiary that is a qualified Sub S subsidiary. If sub s for corp makes sense then elct s status. LLC can be corp electing sub s and its operations are folded into parent. Same as single member llc. All states do not follow this, however, in some states a separate return is required for llc. | |
| 27 September 2007 | |
| Is there any way for an LLC (that is 100% owned by an out of state corporation), but that owns AZ real estate,to file a separate tax return in AZ with only the AZ information? | |
Bottom Line (talk|edits) said: | 28 September 2007 |
| You probably want to start a separate post for this and mention in the heading that it is a question about AZ taxes. | |
