SINGLE MEMBER LLC

[JACKSORH]

Can a single taxpayer whose business is an LLC, still file a Sch. C for his business. I read in another post that he can't use a Sch. C for the business. Is this correct?

[GLJEANNE]

If it's a single-member LLC, he should be using C

[JJStephens]

A single member LLC can be treated as a 'disregarded entity'. If so, for tax purposes the LLC is essentially ignored and the owner reports biz income and expense as though it was a sole proprietorship (e.g., on Sch C).

[Ray in Ohio]

I agree. Single owner LLC = Sch C

Been doing it for 10+ years.

[joelgilb]

Only way is Sched C.

Now I have a new wrinkle. Single Owner LLC investing in RE. Does Sched C cause him Soc Sec taxes when previously he had prop on Sched E. or just IRS exposure because we put on Sched C and don't calc SS?

Joel

[michaelmars]

oy, single member llc that is real estate is an E not a C and not SE tax!

[ajuroff]

Can a single taxpayer whose business is an LLC, still file a Sch. C for his business. I read in another post that he can't use a Sch. C for the business. Is this correct?

Sole proprietor now formed an LLC. How do you deal with depreciation that has already been taken?

[Slappy Tax]

For Joel & Ray: Why can't the SMLLC elect to be treated as an S-Corp for tax purposes? I don't believe it's true that the only filing option for an SMLLC is via Schedule C. Let me know if I'm missing something.

[ajuroff]

A single member LLC can be treated as a 'disregarded entity'. If so, for tax purposes the LLC is essentially ignored and the owner reports biz income and expense as though it was a sole proprietorship (e.g., on Sch C).

The sole proprietor now formed a single member LLC and is treated as a "disregarded entity". He will continue to file a Schedule C. I'm not clear on how to deal with the depreciation that has already been taken when filing as a sole proprietor. Any help?

[Slappy Tax]

Ajuroff: Maybe I am really missing something here, but I don't think you need to do anything with the depreciation other than what you have been doing. In other words, the client has formed a Single Member LLC (SMLLC) and has elected to have it treated as a disregarded entity for tax purposes. So in effect, for federal tax purposes, nothing has changed. He will continue to file the Schedule C but with the business name entered on Line C of Schedule C, and the LLC EIN entered on Line D of Schedule C. My take on this is that the LLC he formed is a legal entity under the laws of his state, but he has not done anything (other than create a name for his proprietorship and obtain an EIN for the LLC) for federal tax purposes. This means that the assets he has been depreciating as a sole proprietor have undergone no change for federal tax purposes, and the client will just continue to file his Schedule C as though nothing has happened (other than adding the LLC name and EIN to the Schedule C). It may be that I'm oversimplifying, but it could also be that you're overcomplicating. Let's see what others say.

[Karen Lee]

transfer at "book value"?

[Slappy Tax]

I would agree with Karen Lee to transfer the assets at book value if a transfer had taken place. For example, if the SMLLC had elected S-Corporation status and the assets had been transferred to the corporation. However, because the client has formed an SMLLC and has opted to have it treated as a disregarded entity, no changes have occurred with the depreciable assets, i.e., they have not been sold, scrapped, donated, or replaced, and no change of ownership has occurred. I would add the name of the LLC and the EIN to the Schedule C, and would chug right along. But I still await the wisdom of others.

[kcjenkins]

Whoa, folks. you missed where Joel asked us about if it was an E before, NOT a C. Joel, in that case it is still filed on the E, no change at all, [in either case] on the depreciation. Same depreciation is continued forward in either a C, an E, or a Sub-S corp. Only in the case of the Sub S, you do have to transfer [at book] the asset to the 1120S.

[Slappy Tax]

I didn't miss anything. My responses were targeted at correcting the original point in which some responses gave the impression that the only filing option for an SMLLC is via Schedule C, which is not the case, and I pointed that out. That evolved into questions on depreciation, but my responses remained valid.

[OldJack]

Same depreciation is continued forward in either a C, an E, or a Sub-S corp. Only in the case of the Sub S, you do have to transfer [at book] the asset to the 1120S.

What has been said is mostly true for federal income tax purposes, but you should not overlook the purpose you are setting up a legal LLC entity. If the LLC is sued one, of the first things looked at in court is did the owner treat the LLC as a separate entity. If I were challenging the LLC entity protection I would ask to see the books and TAX RETURN for the LLC.

Therefore, in my opinion, the single member LLC should file a separate tax form attached to the 1040 be it a sch-E, sch-F, or sch-C. I would allocate the years depreciation for each schedule based on the date of transfer of assets to the LLC. And yes, you must legally transfer the assets (whatever that takes) if you want them protected by the LLC entity. You can't just ignore the LLC entity and expect to have the LLC protection!!

[taxxcpa]

In the case of a Schedule C there is a place to show the LLC's EIN, but for Schedule E, there is no place for anything but a SSN. When one of my clients formed an LLC for a rent property, I just showed the whole year on a single schedule E, but in the case of Schedule Cs, I have split the business between one Sch C for the period prior to forming the LLC and another on with the LLC's EIN for the period after the LLC was formed. I split the depreciation based on the number of months between the two Sch Cs.

There may be a risk of a lawsuit but it probably won't happen the first year of the LLC's existence. Nevertheless, your point is well taken. Two Schedule E's might have been a wiser course for me to have taken in the situation I described above.

[OldJack]

There may be a risk of a lawsuit but it probably won't happen the first year of the LLC's existence. Nevertheless, your point is well taken.

Even though you know there is no lawsuit in the first year as you prepare the first year tax return, it is wise to file a separate schedule for the LLC to show/prove that you have separated the LLC business from your personal business from the very beginning. What better proof could one have than to show the LLC was a separate entity in business operation from the start and thereby provide personal protection? IMHO to file only one form for the startup year is malpractice begging for the client to sue you if he loses a lawsuit because of the LLC being ignored in court.