Discussion:Limited Liability Company
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| 4) I cannot comment on the efficacy of C- versus S-status of your client's corporation.}} | 4) I cannot comment on the efficacy of C- versus S-status of your client's corporation.}} | ||
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| + | {{ForumReplyPost|UserID=Tonypa|Date=9 December 2005|Text=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." }} | ||
Revision as of 14:18, 9 December 2005
Discussion Forum Index --> Tax Questions --> Limited Liability Company
| 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." | |
