LLC Questions

[TAX]

Client has LLC with two members (Husband and Wife) in the state of GA.

(A) Client will have to file 1065 or should he file Sch "C" as Husband and wife are only members

(B) He is expecting loss this year (first year). Would he be better of S corp or LLC?
I think either way it will go to his personal return and reduce W-2 and other income.

(C) Will it be beneficial to pay his kids (13 & 15 years of age)?

(D) Can his wife get away with not taking salary as it is LLC and not S corp?

Thanks!

[OldJack]

Client has LLC with two members (Husband and Wife) in the state of GA.

(A) Client will have to file 1065 or should he file Sch "C" as Husband and wife are only members

GA is not a community property state and the multi-member LLC by default is taxed as a partnership requiring the filing of form 1065 allocating the profit/loss and reporting the same on 1040 Sch-E.

(B) He is expecting loss this year (first year). Would he be better of S corp or LLC?
I think either way it will go to his personal return and reduce W-2 and other income.

LLC

(C) Will it be beneficial to pay his kids (13 & 15 years of age)?

No.. kids did not work for pay or they would have already been paid.

(D) Can his wife get away with not taking salary as it is LLC and not S corp?

Salary is not required or considered allowed for a partner in a partnership-LLC.

[Kram BergGold]

(A) Client will have to file 1065 or should he file Sch "C" as Husband and wife are only members
Either file 1065 or two Schedule C's using rev proc 84-35 to elect to file Scheudle C's rather than 1065 for a small partnership.

D) It is a partnership so owners do not get W-2 Forms.

[TAX]

(A) Client will have to file 1065 or should he file Sch "C" as Husband and wife are only members
Either file 1065 or two Schedule C's using rev proc 84-35 to elect to file Scheudle C's rather than 1065 for a small partnership.

D) It is a partnership so owners do not get W-2 Forms.

In this case, client already paid salary to his wife. Can he get taxes back? Should clinet discontinue paying any more salary right away? He still needs to issue W-2 for what already took place?

Thanks!

[Bill Tubbs]

Kids

Client has LLC with two members (Husband and Wife) in the state of GA.

(C) Will it be beneficial to pay his kids (13 & 15 years of age)?

If kids are doing legitimate work, and client backs that up with timesheets, etc., then yes, it could certainly be beneficial -- moreso when there is a profit that is subject to SE tax. Kids under 18 that work for their parents (either Sch C or 1065 -- Note: if any partner of the 1065 is not a parent then this will not work) are exempt from FICA. Also take a look at tax bracket the kid is in vs. the tax bracket of the parents. The standard deduction for a kid is $5000 (2005 figure) -- so if kid's only income is from working for parents, kid can earn $5000 tax-free, and parents can deduct $5000 of wages paid from their business. Plus, kid could also have a medical reimbursement plan.

Keep in mind though too... I have seen small family business do too good of job reducing business income that when it comes time for clients to finance a loan (or refi their mortgage), they have a problem because they don't have enough income for the loan.

Bill

[Unregistered]

I do not believe that Rev Proc 84-35 gives any authority to file TWO Schedule C forms.

The purpose of the Rev Proc is to ensure that partnerships with 10 or less partners do not get assessed penalties for not filing an actual 1065 form as per the definition of partnership in §6231. The partners must fully report their share of the income, deductions, and credits of the partnership on their timely filed income tax returns even though an actual 1065 was not filed. Thus, they use information as if they had rececived an actual K-1 from the partnership.

New York Enrolled Agent

[Black Bart]

Armando

The purpose of the Rev Proc is to ensure that partnerships with 10 or less partners do not get assessed penalties for not filing an actual 1065 form

New York Enrolled Agent

I was just wondering if you might have an opinion or comment on this issue.

[Bees Knees]

That's what the Rev Proc says. No penalty for not filing a 1065, if there are 10 or fewer partners.

If there is no penalty, why bother.

[Armando Beaujolais]

I was just wondering if you might have an opinion or comment on this issue.

Hey hey HEY!

Right now I'm in the middle of an unholy mess with a pack of angry sports moms who don't think their kids are getting a fair shake in our youth sports program. Don't get me going now. You don't WANT to get me going now.

Since it's a partnership, I would suggest filing in the correct manner, which is Form 1065, U.S. Return of PARTNERSHIP Income [emphasis added].

[Bees Knees]

Right now I'm in the middle of an unholy mess with a pack of angry sports moms who don't think their kids are getting a fair shake in our youth sports program.

If the pack of angry sports moms number 10 or less, then they don't have to come after you as a partnership. They can each come after you individually as sole proprietor units.

[Unregistered]

Salary is not required or considered allowed for a partner in a partnership-LLC.

What about the salary that has already been paid (right or wrong). Should the partner still gets W-2? Should they stop payroll right away for this partner?

Thanks!

[TAX]

What about the salary that has already been paid (right or wrong). Should the partner still gets W-2? Should they stop payroll right away for this partner?

Thanks!

Forgot to log in. This post from Tax.

[BOB W]

LLC Members....

...... get paid through Guarenteed Payments which is subject to SS through the K-1. There is no major problem issuing a W-2 for already issued 941 forms, just cease and use guaranteed payments going forward.

[TAX]

[QUOTE=OldJack](B) He is expecting loss this year (first year). Would he be better of S corp or LLC?I think either way it will go to his personal return and reduce W-2 and other income.

LLC

What if he has Profit instead of Loss? Then my answer would be "S" corp. Otherwise he would pay SE on entir profit. Do you agree?

Thanks!

[BOB W]

LLC Profits

Many discussions are on this board about LLC profits NOT being subject to SE taxes, only GP. If you do a search of this web site you should find those discussions.