2 LLC's report as 1 corp?

[schirallicpa]

My client recently had an LLC transferred to him as sole member.  He also just bought another similar business and created an LLC for that.  I want him to form a corporation. I want the corp to hold both LLC's.   How best proceed?  Create new corp and the corp owns the LLC's? (LLC's are already set up in sole member's name.)   Can 2 LLC's simultaneously elect to be one corp?  I feel like this is backwards planning - but you know how clients go.  

[Lee B]

Set up a third SMLLC which is the parent of the first 2 LLCs, then elect for the third LLC to file an 1120 or 1120S.

[mcb39]

I wouldn't do that.  I would move forward with the 3 LLC, Sole Proprietors.

[Lee B]

1 hour ago, mcb39 said:

I wouldn't do that.  I would move forward with the 3 LLC, Sole Proprietors.

The original post doesn't really give  us enough information for us to know what the best approach would be

[BrewOne]

I would take a step away from advocating the creation of a corporation--just give advice on pros and cons from a tax perspective and tell them to confer with a lawyer.

[schirallicpa]

The lawyer is asking me.  I am all for a corporation instead of LLC.  He's got a lot going on that he needs to get these 2 businesses under one roof.  

[BrewOne]

glad to hear that it's coming from a lawyer.  We have to watch out for practicing law (and what our insurance will cover).  And this is much better than the usual scenario where the client tells you in March what they did last June.

[Abby Normal]

39 minutes ago, schirallicpa said:

The lawyer is asking me.  I am all for a corporation instead of LLC.  He's got a lot going on that he needs to get these 2 businesses under one roof.  

Since SMLLCs are ignored for tax purposes, why not just transfer one LLC into the other and just have one entity? You can then elect S status for the surviving LLC. Then do departmental accounting if you want to track the two business separately.

[Lee B]

13 minutes ago, Abby Normal said:

Since SMLLCs are ignored for tax purposes, why not just transfer one LLC into the other and just have one entity? You can then elect S status for the surviving LLC. Then do departmental accounting if you want to track the two business separately.

On the other hand, there may legitimate reasons due to legal liability to have the business assets split between the 2 LLCs

We just don't know enough.

[Abby Normal]

3 hours ago, Lee B said:

We just don't know enough.

Yeah, there's a lot of information missing for this decision.

[Catherine]

I'd question the lawyer why s/he is recommending this complicated structure. What is the intent - asset separation, asset (personal & business) protection, corporate veil, employee separation, what? The concerns leading to the recommendation may point out the best tax/accounting method. But right now, I can see good reasons to do any of the structure types listed above. Eeny meeny miney moe - get some reasons by their toe!

[schirallicpa]

Client and Lawyer and myself want to get this into corp return and off from his personal return to give some separation, and to set up payroll for him and his wife at the corp level.  He has some other business on his personal return and I feel he needs this pulled out onto a corp return.  However, the first business that he took over was already set up as an LLC.  The second business that he just purchased the lawyer has already got set up as an LLC.  I don't want 2 separate corp tax returns - woould like 1 corp tax return to report both businesses (they are similar restaurant businesses).  

I'm thinking I have one of the LLCs elect to be treated as corp and the other one report as owned by the new corporation.

[DANRVAN]

55 minutes ago, schirallicpa said:

and the other one report as owned by the new corporation.

 A SMLLC owned by a Sub S?  I don't think it works that way; a disregarded entity owned by a corporation?

[schirallicpa]

"Since SMLLCs are ignored for tax purposes, why not just transfer one LLC into the other and just have one entity"

 

How exactly do I do that?

[Lee B]

42 minutes ago, DANRVAN said:

 A SMLLC owned by a Sub S?  I don't think it works that way; a disregarded entity owned by a corporation?

 

According to multiple sources :   "If the single-member LLC is owned by a corporation or partnership,

the LLC should be reflected on its owner's federal tax return as a division of the corporation or partnership."

[Abby Normal]

12 minutes ago, schirallicpa said:

"Since SMLLCs are ignored for tax purposes, why not just transfer one LLC into the other and just have one entity"

How exactly do I do that?

Transfer all of the assets into the surviving LLC, re-title if need be. Transfer the cash into the surviving LLC's bank account. Assume any liabilities. Close the old LLC.

[schirallicpa]

I don't know why things have to be so complicated.  

I shall proceed.............

[DANRVAN]

7 minutes ago, Lee B said:

According to multiple sources :

Please post a source, I don't think I have ever seen this before?

[jklcpa]

4 hours ago, DANRVAN said:

Please post a source, I don't think I have ever seen this before?

Two screen shots:

[Lee B]

https://www.thetaxadviser.com/issues/2023/jun/single-member-llcs.html

[DANRVAN]

2 hours ago, Lee B said:

https://www.thetaxadviser.com/issues/2023/jun/single-member-llcs.html

I knew a SMLLC could be a Sub S shareholder but never imagined, or heard of a corp owning  a SMLLC.   Maybe there is a legal purpose, but for tax and accounting I don't see any advantage since it goes back the the owner's tax return.