slim_jim
Contributor
thanks for the corrected information. I wonder if the original author would make a correction?
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Free registration at the forum removes this block.As for how you hold rentals, you'll probably want a master LLC/partnership that will hold other entities that ultimately hold your properties. The number of properties in each entity is dependent on your threshold for risk, the amount of equity in each property, and a host of other factors that you'll have to consider. There's no right or wrong answer.
One thing worth noting, since I have 2 entities myself is that the more entities you have will equal more book keeping costs for you each year. My CPA charges me about $250 per entity to manage all of the books for that entity, handle my annual minutes, keep my binders up to date to keep us compliant, etc.. just in case we're ever called into question by the powers that be. So if I had 10 entities, that would be $2500 per year.
- Hakrjak
My accountant told me last year (I think) that RE should NOT be held in an S-Corp.
I understand the reason for not holding RE in a C-Corp, but why not an S-Corp??
hmm... ok. You are probably right. Well I need to look into this because I don't consider myself an employee. I just write myself a monthly check based on profits. There are only 2 members and we pay ourselves a bit from the profits each month but don't pay FICA taxes.Not sure this is correct. If your LLC-taxed-as-an-S-Corp has employees (including yourself), you should be paying FICA and unemployment taxes on all salary paid to employees of the LLC. You can avoid some FICA by paying distributions that are not salary, but this is only over-and-above a reasonable salary.
It's been 3 years and I have yet to pay quarterly. I wonder if they know or if they don't know this is happening. I was audited for 2007 this past year and they said I didn't claim some income. I had some checks still coming into the LLC that were under my SS# and not my Business ID number. I gave them proof that in 2007 I did claim them through the LLC and not personally since I chose to be taxed as an S Corp. They said thanks and I was all set.You can generally get away with not paying estimated quarterly the first year, but after that, you'll be expected to pay estimated quarterly taxes based either on your previous year's taxable income or your current year's taxable income.
This makes complete sense actually. Thanks for breaking it down for me.Yes, an LLC (or corporation) can be an owner in another LLC (or another corporation).
If an LLC (call it LLC 1) with 2 members is 25% owner of another LLC (call it LLC 2), then 25% of LLC 2's income will be distributed to LLC 1. That income will be split up by the members of LLC 1 in proportion to their ownership of LLC 1, and each would be responsible for paying taxes on their portion.
Does that make sense?
OK good. What about the quarterly filings though? Shouldn't I be doing it quarterly? I remember when I first started it said that I would be notified by the IRS if I needed to file quarterly. I know I shouldn't count on them to let me know but I haven't gotten any notifications. I just don't want to end up getting nailed with some stupid penalty.If you declared as a Partnership and you paid self-employment taxes, you should have the basics covered...
All business entities are taxed based on their default classification. Therefore, neither form 8832, nor form 2553, are required unless the business entity wishes to change their current default classification for tax purposes. Form 8832 allows certain business entities (mostly non- corporation classified businesses) to choose what type of classification it would like to be taxed as. While form 2553 allows corporations to become an S corporation, and thereby be taxed as an S corporation. Which form is used depends on the type of business entity that wants to elect a new tax classification.
- Form 8832- for a business entity (mostly non-corporations) to become taxed in a different class (including an S corp.)
- Form 2553- for a corporation to become an S corp.
OPTION 1: LLC ELECTING TO BE TREATED AS A C CORPORATION (C CORP)
IF YOUR LLC HAS ONE OWNER:
If the LLC has only one owner, the Internal Revenue Service (IRS) will automatically treat the LLC as if it were a sole proprietorship, a disregarded entity, unless an election is made for it to be treated as a corporation. An LLC may elect corporate tax treatment using IRS Form 8832 (Form 8832 Entity Classification Election).
IF YOUR LLC HAS MORE THAN ONE OWNER:
If the LLC has two or more owners, the IRS will automatically treat the LLC as if it were a partnership unless an election is made for it to be treated as a corporation. An LLC may elect corporate tax treatment using IRS Form 8832 (Form 8832 Entity Classification Election).
OPTION 2: LLC ELECTING TO BE TREATED AS AN S CORPORATION (S CORP)
An LLC may elect S Corp tax treatment by filing IRS Form 2553 (Form 2553 Election by a Small Business Corporation). However, sometimes the LLC must file both Form 8832 (see Option 1 above) and Form 2553. To determine whether your LLC can file Form 2553 alone, or whether Form 8832 must also be filed, see page 1 of the Instructions to form 2553 or talk with a CPA or LLC attorney in your state.
Yeah, I noticed that.This thread is years old... I wonder how much rules have changed since she wrote this...
Not an expert, but, didn’t Amazon report losses for more than a decade in a row?Is there anything wrong with filing/reporting a loss the first three years as an LLC?
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Is there anything wrong with filing/reporting a loss the first three years as an LLC?
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