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sole proprietor to llc

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    sole proprietor to llc

    I have a client who wants to have an LLC for his house flipping but has not done so yet. He has several business expenses for 2015 and has already bought a house. Advised him to show all that on a sole proprietorship this year. I'm assuming in 2016 when he set's up the LLC, the assets could just be transferred in an IRC 351 transfer, I know that is available for corps assuming same for LLC?? I don't want to advise him wrong and cost him more money.

    #2
    any advice????

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      #3
      Originally posted by Super Mom View Post
      I have a client who wants to have an LLC for his house flipping but has not done so yet. He has several business expenses for 2015 and has already bought a house. Advised him to show all that on a sole proprietorship this year. I'm assuming in 2016 when he set's up the LLC, the assets could just be transferred in an IRC 351 transfer, I know that is available for corps assuming same for LLC?? I don't want to advise him wrong and cost him more money.
      If your client forms a "single member" LLC then he will still report on Sch C unless he makes an election to be taxed as a corporation.

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        #4
        Seek legal advice

        Originally posted by Super Mom View Post
        I have a client who wants to have an LLC for his house flipping but has not done so yet. He has several business expenses for 2015 and has already bought a house. Advised him to show all that on a sole proprietorship this year. I'm assuming in 2016 when he set's up the LLC, the assets could just be transferred in an IRC 351 transfer, I know that is available for corps assuming same for LLC?? I don't want to advise him wrong and cost him more money.
        I have an attorney client who has rentals and each rental has its own LLC as he had told me. I would encourage him or her to seek legal advice on the LLC formation and any property transfer. Your advice for 2015 sounds correct.

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          #5
          Originally posted by AZ-Tax View Post
          I have an attorney client who has rentals and each rental has its own LLC as he had told me. I would encourage him or her to seek legal advice on the LLC formation and any property transfer. Your advice for 2015 sounds correct.
          I am not an attorney but I think the reason some people have each property in its own LLC is to isolate liability from each other under state law. From a federal tax perspective it does not make any difference other than more work if all of them are SMLLC.
          Taxes after all are the dues that we pay for the privileges of membership in an organized society. - FDR

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            #6
            Originally posted by BHoffman View Post
            If your client forms a "single member" LLC then he will still report on Sch C unless he makes an election to be taxed as a corporation.
            I think he has a partner

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              #7
              "Multi-member" LLCs report as a partnership on form 1065.

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                #8
                Originally posted by BHoffman View Post
                "Multi-member" LLCs report as a partnership on form 1065.
                Yes I know. In a corporation, they can have a one time transfer of assets for 80% or more stock control of the company. Is it the same for an LLC? They don't have "stock" per say but they do have percentages of control.

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                  #9
                  Originally posted by Super Mom View Post
                  Yes I know. In a corporation, they can have a one time transfer of assets for 80% or more stock control of the company. Is it the same for an LLC? They don't have "stock" per say but they do have percentages of control.
                  Pub 541 and/or The Tax Book's Partnerships chapter can tell you how to treat property contributions into a partnership.

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                    #10
                    I FINALLY saw it in TTB 27-2 and 27-3---transfers to partnerships for a partnership interest is also not taxable, just must be depreciated using the same method, basis, etc...

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