Llc elected c 1120 tax method questions

[FREDR]

ALL INVESTMENT WAS MADE BY A PASSIVE OWNER. THEY RESIDE IN ANOTHER STATE WITH NO OPERATION, NOR OTHER SERVICE PROVIDED TO THE ENTITY.

IF OWNER ONLY PROVIDES CAPITAL INVESTMENT AND HIRES EMPLOYEE MANAGER, IS THAT WAGE ENTERED IN SCHEDULE E? OFFICER STATUS OF MANAGER?

CAPITAL ACCOUNT IN LLC GENERAL LEDGER EQUAL TO RETAINED EARNINGS OF 1120 SCHEDULE L?

1120 CAPITAL DISTRIBUTIONS ARE REPORTED WITH 1099-DIV. IS THIS THE SAME ON THE LLC GENERAL LEDGER ADMINISTRATION?



I AM USING REQUESTING LATE LLC TO BE TAXED AS 1120 C WHICH MAY OR MAY NOT HAVE BEEN REQUESTED AT ORIGINAL EIN AUTHORIZATION. THE LLC WAS FORMED OCT 2011 WITH $50,000 CAPITAL THAT HAS NOT BEEN DISTRIBUTED IN ANY WAY TO THE INVESTOR THRU JANUARY 2013. THIS IS THE INITIAL INCOME TAX FILING. COULD THIS A CONCERN?

RESPECTFULLY
Fred R Hatcher, CTP, MCA, PA
frhatcher@abcats.com

[Bees Knees]

Schedule E is for the wages paid to officers of the corporation. A non-owner manager who does not sit on the board of directors of the corporation is not an officer.

If an LLC elects to be taxed as a C corporation for federal tax purposes, then that includes the tax treatment of dividend distributions, including the requirement to file Form 1099-DIV. The only difference between a C corporation and an LLC that elects to be taxed as a C corporation is state incorporation filing requirements. For federal tax purposes, there is no difference. Thus, you would have to split up the owner's equity (capital) account into the various C corporation equity accounts (capital stock, retained earnings, etc.).

One question I have is why would an LLC want to elect to be taxed as a C corporation? In my opinion (and it is just an opinion), single owner entities should not be C corporations, unless you need to retain a huge amount of profits each year for future expansion. If you are just going to distribute those profits as dividends each year, you are paying more tax than if the LLC was not a C corporation.

[FREDR]

Llc to 1120 reply to bees knees

Future as well as current financial benefits by avoiding fica and taking advantage of future values. Using contribution margin approach to wealth acquisition and management techniques. High percentages at this point of the financials means accelerated asset acquisition together with liability retirements together with high cash liquidity in the future. The qualified dividend treatment of u s corporations is a side benefit.
Thank you for responding to this and my 1040 nol query.

Fred r hatcher
frhatcher@abcats.com

[Bees Knees]

An S election avoids FICA as well, without the double taxation of a C corporation (39.6% top rate for S corp compared to 35% + 20% = 55% top rate for C corps). --- Not to mention the new 3.8% Medicare tax for high income taxpayers on their dividends. S corp K-1 flow through profits are not subject to that new tax.

[FREDR]

Bees you are right

Managing the net income and wealth management is where it all resides. There is a very thin line to dance for professionals such as you and i. We are here to fix what others haven't even thought about.