LLC ownership

[DTS]

I have been asked a question twice in as many days regarding "ownership" of an out-of-state LLC. I need some definition of "ownership" please.

If I own a business in CA then open a business in AZ, I own both businesses. Does the same apply term apply to CA LLC members who start an LLC in AZ? They did not BUY the AZ LLC, just opened a new LLC there.

How do you determine if one LLC owns another LLC?

I really hope this doesn't sound stupid to you like it does to me rereading this post. It is a legitimate question.

Thank you, Dennis

[Lion]

LLCs

LLC A can be a member of another LLC B, with or without additional members -- like a parent and child.

The members of LLC A can be members of LLC B in the same or different percentages of ownership -- the same individual members own two different LLCs.

LLC A can open another business location/office/store/product line/etc. in another state without creating LLC B. Although, LLC A would have to register to do business in the second state as a foreign LLC -- one LLC with multiple locations.

How did your questioners organize within their or within the second state? They are probably asking you a legal question and not a tax question, because you charge less than their lawyer! If you need to research it further for them, you'll probably have to look on the secretary of state websites for each state (as opposed to the department of revenue or whatever it's called out West). Read the instructions for the LLC applications in each state to see what might not be allowed in the way of ownership or out-of-state ownership.

And, charge them as much as their lawyer would.

[Bird Legs]

LLCs

Do not forget the disclaimers that go with your advice, re the new Circular 230 rules.
tweet...

[DTS]

This started...

when I inquired with the state agency about a couple of items on the return I was going to prepare. The first question out of his mouth was "do they own the other LLC". I thought to myself, yes, but then thought maybe not, thinking the entity did not buy the other LLC.

The second, came from company that sets these up and through some email inquiries, he made a "what if" statement about ownership, but did not elaborate on this terminology.

Cannot find anything that will give me the definition of "ownership".

Thank you for the help. I appreciate it. Dennis

[Lion]

Ownership

Keep us posted.

[DTS]

Lion

I will keep you posted. Thank you for helping.

On the story you related about your name...when my granddaughter was about to be born, many were teasing me about being a young grandfather (46 at the time). They would say, "what do you want her to call you?" I would tell them, she could start with "Mr. Shedd!"

I like your real name. Why don't you sign-off with it?

Dennis

[BOB W]

Ownership

Ownership of an LLC is declared with the first filing of the 1065. That ownership can be any one you choose. The owners of LLC A can be the owners of LLC B or LLC B can be owned by LLC A. If LLC A is the only member of LLC B then LLC B is a SMLLC and becomes a disregarded entity for Federal Tax purposes.

When you cross over state lines you would need to do an allocation of income to determine which state sales and expenses are reportable to which state. This is if LLC A is the only member of LLC B.

If LLC B is owned by two or more individuals, it will be a "stand alone" entity and all income and expenses are reported as such.

In other word, if I read the original question correctly, you design the ownership of a new LLC based on needs and objectives, and in some cases, simplicity.

Almost always you need to look at the documents forming the LLC to show the intended owners (member(s)) of an LLC. The tax return is when it is first reported to the IRS.

[abby]

inserting a reply

If my memory of this thread is not faulty, it seems there's a way to insert a reply to a particular post rather than at the end of the line.

Is this, in fact, possible? If possible, is it discouraged?

Is this something a humble junior member could do?

Any guidance from the seniors would be appreciated.

[DTS]

Bob W

Your explanation of the LLCs seemed to make things clearer to me. I appreciate the time you took to explain this in detail to me. This is what I need for the return I am doing.

Thank you, Dennis

[BOB W]

Dts

Dennis, I'm happy you were able to make your way through my A & Bs. I just re-read it and while it ultimatley was correct it may have been difficult to read. I don't have the pizzaz of some of the more learned writters on the board..

.. but I get credit for a post and I'm living up to my promise to earn my "Member Status".

[DTS]

Bob W

I made it through just fine. I did have to reread it a couple of times to keep my groups in line with yours, but you did great!

I know what you mean about the others on the board. They express themselves so much better than I do, but we can give ourselves an "A" for effort!

Thanks, Dennis