Business start up

[TAX4US]

OK TP been in business 20 years as Sub S.Healthy profit each year. Deceides to open in another town. Opens this as a single member LLC same business type. Before he can get open tremendous amount of work done on building to get ready to open in 2012. Opens November 2012 but has no income untill Jan 2013. Would you set up dep for 2012? Wouuld you componet the work done in 2012? What to do with interest on loan to buy building and make repairs and improvements? Capitalize it all? I can't see where this would qualify as new business start up as tp was already in this same line of work. What are you suggestions? Thanks

[JohnH]

My first thought is that it is a new business startup because it's a different entity. An LLC is a separate entity than an existing S- Corp, even if the LLC later elects S-Corp treatment.

[AZ-Tax]

What benefit to an additional LLC?

What is the benefit of adding another LLC. If TP opened an additional location within same state, then why go thru the exps of another LLC not to mention, another set of books exp and an additional tax prep return exp. What am I missing?

[Bees Knees]

What is the benefit of adding another LLC.

The benefit is limited liability. If the LLC fails, they can't go after the S corp assets. If the S Corp fails, they can't go after the LLC assets.

[veritas]

How much Limited Liability in an LLC?

Worker's compensation loophole
A February Oregon Court of Appeals ruling has opened up the possibility that injured workers could sue the owners of the company they work for if the company is a limited-liability corporation, even if they are covered by worker's compensation. Rep. Bruce Hanna, R-Roseburg, introduced House Bill 2923 and is working on an identical measure, Senate Bill 678, which passed the Senate unanimously in April. Both bills would treat those companies just like any other corporation under the law.

[AZ-Tax]

2nd location having it's own LLC

The benefit is limited liability. If the LLC fails, they can't go after the S corp assets. If the S Corp fails, they can't go after the LLC assets.

Bees, are you saying by having the 2nd location be a separate LLC, anyone going after the assets of the 2nd location are ONLY limited to the assets of the 2nd location?

If that is correct, can both LLC's be under one S-Corp tax return? In AZ, you are not required to have an EIN number to have your LLC approved.

[Bees Knees]

Bees, are you saying by having the 2nd location be a separate LLC, anyone going after the assets of the 2nd location are ONLY limited to the assets of the 2nd location?

If that is correct, can both LLC's be under one S-Corp tax return? In AZ, you are not required to have an EIN number to have your LLC approved.

If a single member LLC does not make the election to be taxed as a C corporation or an S corporation, then for federal tax purposes it is treated as a disregarded entity. That is why single member LLCs usually file a Schedule C as a sole proprietor, because they are disregarded as a separate entity.

If an S corporation were to be a 100% owner of an LLC, and the LLC does not elect to be taxed as a C corporation or an S corporation, then the LLC is also disregarded as an entity separate from its owner (the S corp) and thus all income and deductions would be reported on the S corp return. This would only apply, however, in the case where it is the S corp and not the S corp shareholder who owns 100% of the LLC.

Getting back to the reason for multiple entities, the main purpose is for liability protection. If you own multiple businesses, even though they may all be treated as one entity for federal tax reporting purposes, they may be treated as multiple entities for limited liability purposes. Thus, one business can fail without dragging all the other businesses down with it.

As to court cases and state agencies piercing these multiple entities, that usually happens when the single owner fails to follow corporate or other state regulatory formalities. For example, lets say you run your construction business through an LLC so that you have limited liability protection, but you own an excavator personally in your own name because the bank wouldn’t loan your LLC the funds to purchase the excavator. If you personally as the owner operate the excavator and dig through a gas line, blowing up half the downtown area, guess who is liable for the accident? You; the owner and operator of the thing that caused the accident.

[TAX4US]

Still need to get back to original question of the Dep, int, other expences incurred to open doors for business. I seem to have read there may have been a $5000.00 cap. What do you think?

[Bees Knees]

I think John answered your question. When you start a new business entity, it is a new business. In your case, unless it is the S corp that owns the LLC, the LLC is considered a new business entity. Thus, start-up cost rules apply. See TTB page 8-17 for info on how to handle start-up costs.