Incorporating - LLC, S C Corp or C Corp

[Absolut]

New company just starting up, two people, they both have their own vehicle and own tools that they will be putting into the business. They want to know which way is best to go, into a LLC or S Corp or a C Corp. Does anyone have any advise on this?

Also if they put the tools and vehicles into the business, how do you set this up in Quickbook for entries? Can I just put the tools and Vihicles up as Assets? or do I have split the FMV on the items to each stockholder?

Thank you for your help.

[Bees Knees]

Go with an LLC taxed as a partnership. Tell them to keep their own tools and vehicles and have the partnership agreement say they must provide their own tools, which allows them to deduct the costs directly on the Schedule E as a loss. Also, have the partnership reimburse the partners for the vehicle mileage using the standard mileage rate = deductible by the partnership, not taxable to the partners.

[Absolut]

Llc

Go with an LLC taxed as a partnership. Tell them to keep their own tools and vehicles and have the partnership agreement say they must provide their own tools, which allows them to deduct the costs directly on the Schedule E as a loss. Also, have the partnership reimburse the partners for the vehicle mileage using the standard mileage rate = deductible by the partnership, not taxable to the partners.

So it would be filed on a 1065 (Partnership Return). Are you saying it would be better for them to rent their own tools, and trucks? How you taking a loss on the schedule E if they are leasing them?

Now I think what your saying on the mileage, is that they keep track of their miles they drive, the company reimburses them for mileage, but this money is not taxable to the owners? Why wouldn't it be taxable?

[Bees Knees]

So it would be filed on a 1065 (Partnership Return). Are you saying it would be better for them to rent their own tools, and trucks? How you taking a loss on the schedule E if they are leasing them?

No, I am saying you take the unreimbursed partnership expenses (their own equipment and purchase of tools) on the Schedule E. See TTB, page 20-5.

[Bees Knees]

Now I think what your saying on the mileage, is that they keep track of their miles they drive, the company reimburses them for mileage, but this money is not taxable to the owners? Why wouldn't it be taxable?

Because reimbursing mileage under an accountable plan is not taxable to the one receiving the reimbursment.

[Absolut]

Mileage

Thanks Bee I understand now, I could I actually put that in their paycheck each week, and not w/h taxes from it? Just want to make sure I'm correct on this.

Allowable Expenses: You said they would be reported on the Schedule E, of the 1040 return. But if the LLC is not renting/leasing them from the each partner how do you record them, just under depreciation? Can you please give me an example, I can't seem to figure out what you mean. I'm sorry.

[KJ Judd]

The allowable partnership expenses go on Schedule E on a separate line from the partnership income. The line is labeled "UPE" for unreimbursed partnership expenses. Sometimes I'll attach a supporting statement listing the various expenses that make up the amount.

You do not need to withhold from the standard mileage rate. If you put on weekly paycheck, be sure to exclude from wages & related calculations.

[S T]

Just a thought

Check the t/p state on how the LLC is treated. In California we have a gross receipts tax, so therefore, don't always recommend a LLC.

Sandy

[Bill Tubbs]

California - gross receipts tax

Check the t/p state on how the LLC is treated. In California we have a gross receipts tax, so therefore, don't always recommend a LLC.

Sandy

Sandy (or anyone),

Could you please elaborate on this? I am from Wisconsin and have 1 CA client -- he just formed a LLC last year (without consulting me first) and is hoping to sell an item for $60,000 -- something he just created (costed about $40,000).

Is this tax applied to all LLC's, regardless if they're taxed as C Corp, S Corp, or Sch C?

Thanks,
Bill

[S T]

Calif LLC and S Corps

Bill,
Here is a website, that might answer your questions regarding operating an LLC in Calif.

http://www.methvenlaw.com/index.html They also answer emails with questions.

Sandy

[Absolut]

Llc

Bill,
Here is a website, that might answer your questions regarding operating an LLC in Calif.

http://www.methvenlaw.com/index.html They also answer emails with questions.

Sandy

ST is there a website in Maine where I can go look also?

Bees Knees:

Again you said to report on Schedule E, which is for rental, I would report no income correct just the expenes of the vehicles? What if I wanted to depreciate it, could I do this under depreciation on the Schedule E. I probably sound totally confused, but I'm used to doing on rentals on a Sch E.

Say the bought the truck for $15,000.00, use it totally for business, have gas expenses, repairs, excise tax, insurance, interest, with say 25,000 (just guessing here, but w/ the area they will be covering they may put that on in mileage). How would you handle this?

[oceanlovin'ea]

2nd page of E

You enter the information from the K-1 on page 2 of the Schedule E. List partnership name, kind of business, ID# and then the income or loss fromt the business. Then the UPE would be listed on the 2nd line.

Linda F

[Jiggers]

Unreimbursed Partnership Expenses

Be sure to reduce your self-employment income by these unreimbursed partnership expenses.

Also, be sure to check "yes" on line 27, page 2, of the Schedule E. You may also want to review the instructions for this line.

Have the clients provide a copy of the partnership agreement that states that they are responsible for these expenses. Just for your records and to help during an audit.

[Jiggers]

LLC, Corp, S-Corp, Partnership

Where do people get the idea that an LLC is a taxable entity?

You may form an LLC, but you are taxed only as a Corp, S-Corp, partnership, or sole proprietor. There is no LLC income tax return.

[S T]

LLC Tax Return

We have a Calif LLC tax return to file.

Sandy