Multiple Divisions under one LLC

[Calvin]

Client plans to operate multiple unrelated businesses under one LLC. Ignoring the liability issue (each business will share in liability for others), what tax issues might we face? Client plans to keep one bank account and one set of books, tracking the revenue and expenses by division. Would it be acceptable to file just one tax return for the LLC or would it need to somehow be broken out by division? If just one return, how should we decide the principal business activity and code when the divisions are entirely different and there is not a clear "main business" at this point? Any thoughts on this are greatly appreciated!

[BHoffman]

Hi Calvin - if your client is a single-member LLC who will report business operations on Schedule C, then this is easy. You can file as many Schedule C forms as it takes to conform to the NAICS codes and use the client's SSN as the TIN on all of them.

[Calvin]

This would be a form 1065 partnership.

[BHoffman]

I was afraid you'd say that

I think each activity that cannot fall within one NAICS code has to be reported on separate 1065 forms and under different EINs.

[Gary2]

If the partners' individual shares of income and assets is based upon the entire picture, then can you really separate it into separate businesses? There'd be no question that a corporation would get a single 1120, while a single individual would get multiple schedule Cs. It isn't clear to me why a partnership would get the latter treatment instead of the former.

[Nashville]

LLC Irrelevant

IRS couldn't care less about how many LLCs are involved. They are disregarded entities anyway.

The partnership 1065 is the real focus. BHoffman, you are not often wrong, and may not be. But I believe IRS preference would be for the partnership to select the predominant NAICS code and file as one entity. Most partnerships (given sufficiently large) dabble in activities outside their main NAICS code.

And of course, this is with respect to taxes only. Multiple NAICS codes mean different things for different purposes. If the entity is a contractor, for example, they may want to register as many NAICs codes as possible with the Central Contractor Registry and SBA.

[BHoffman]

It would help if we know what kind of different activities:

Restaurant and manufacturing and real estate sales and construction?

Some activities require accrual basis reporting, some don't.

Some tax credits and deductions are industry specific. If the NAICS code is for some kind of service-only industry and the client takes a restaurant tip credit or claims the DPAD, that could raise a big red flag.

Calvin - can you list the different activities?

[LCP]

Any further thoughts?

If it's true that Sched. C's get audited more frequently than other entities I can see an advantage to running the business activity thru a Form 1065....... properly reporting it as such of course.

[Gary2]

If it's true that Sched. C's get audited more frequently than other entities I can see an advantage to running the business activity thru a Form 1065....... properly reporting it as such of course.

In general, you don't get a choice. You can't just decide to put a Sch. C activity onto a Form 1065 - there have to be at least two partners involved.

I can think of two exceptions: qualified joint ventures and situations where the existence of a partnership is arguable. But in both cases, you have to have a real partnership to use the 1065.

[LCP]

In general, you don't get a choice. You can't just decide to put a Sch. C activity onto a Form 1065 - there have to be at least two partners involved.

I can think of two exceptions: qualified joint ventures and situations where the existence of a partnership is arguable. But in both cases, you have to have a real partnership to use the 1065.

Good point...... I was thinking of a husband and wife that is already filing a 1065.