I have a client that purchased a franchise and is structured as a C-corporation, they would like to elect an S-corporation for tax purposes. They will eventually own three boxing clubs and want each location to be protected. Each location will be set up as a single member LLC owned by the S-corporation, each with its own Federal and State tax id numbers. With this structure can we get away with filing only one S-corporation tax return for the parent and 3 subordinate LLCs?
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This might help
Originally posted by chashooks View Post
I really don't know if the S Corp owning a SMLLC (disregarded entity) really works but he says it does; this part makes my brain melt! The author says the disregarded entity just disappears, this part I am not sure about. I mean, would there be anything to reflect this ownership on the return? Beats me.
Conversley, another method (also mentioned by the author) if you wanted to report all activity under one entity, you should consider setting up Q Subs (these can also be LLCs setup as Q Subs) for each location. This effectively sets up a separate legal entity for each location, but for tax purposes the income and expenses are combined on one return (the parent 1120S). Check your state's laws for details but this should allow separation of legal liability for each location. This is a great idea if the taxpayer wants to limit the risk of one location's liability or risk exposure to affect the other locations.
The best advice I can give on this subject, if you haven't already mentioned this to your client, is to enlist the services of a competent attorney that specializes in entity formation. A few thousand it may cost but it would definitely be worth it to ensure the entities are setup correctly.
Good luck and good luck to your client and his new businesses!Circular 230 Disclosure:
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