Llc

[tonsop]

Need help to determine how to file the tax return. When an LLC owns by the husband and wife living trust, is it consider two members or single member?

[Burke]

No need to file a return for the LLC, as it is considered a disregarded entity in this case. It is a 2-member LLC if there are two member/owners, but I am assuming they are filing a joint return and a H&W venture can be treated as one on the tax return. See related thread dated 7/18/14 titled "Inherited" for a discussion of partnership returns.

[Lion]

A qualified joint venture by a husband and wife is a disregarded entity ONLY IF it is not organized as an entity under state law, including an LLC. A two-member LLC would file Form 1065 unless it elects to be taxed as a corporation. Only a single-member LLC can be a disregarded entity and file on the member's 1040. I'm speaking from a non-community property state, by the way.

[TaxGuyBill]

First, a direct answer to the question: it is considered two members.

As Lion said, a multi-member LLC business needs to file a partnership return. The exception is in a community property state, an LLC with only a husband and wife has a choice to file a partnership return or two Schedule Cs (or Schedule Es or Fs). I'm not sure if the wife's Living Trust (revokable) would mess up that option or not.

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Single-Member-Limited-Liability-Companies

[Gary2]

I think people have missed the essence of the question. I read it as saying that the LLC is owned by the trust, and the trust happens to be a joint, husband and wife living trust. So on paper, at least, the LLC has only one member, the trust.

The question is whether the trust is disregarded in this case. I believe the answer is no, because grantor trusts, except in very specific circumstances, still have to file a return, even if the return is essentially a pro-forma declaring it to be a grantor trust. Or to put it another way, the division of income of the LLC will be specified by the trust document, and not the LLC documents - since the LLC documents can't even acknowledge the existence of more than one owner.

But I'm not 100% certain of this analysis, so I encourage more research. And, of course, if I'm misinterpreting the original question, then ignore this response entirely.

[Burke]

I think people have missed the essence of the question. I read it as saying that the LLC is owned by the trust, and the trust happens to be a joint, husband and wife living trust. So on paper, at least, the LLC has only one member, the trust.

1. Although the OP was not specifically clear on this point, I agree that, as he wrote it, the trust owns the LLC and that therefore there is only one member, (i.e, the trust) even though there may be two trustees and these trustees may be the H&W. There was no indication that there were separate individual RLTs, which is often the case.

2. A single-member LLC is considered a disregarded entity by default unless an election is made otherwise. Ownership of an LLC by a revocable living trust does not relieve the grantor from the responsibility of possible taxation from the net income of such LLC.

3. See www.irs.gov/instructions/i1041/ch01.html#d0e744 for a discussion of Optional Methods for Certain Grantor Type Trusts in which all property is owned by a H&W and they file a joint return. In this case, the H&W are treated as one grantor, and a 1041 need not be filed if certain conditions are met.