LLC/S-corp owns another LLC/S-Corp - How to avoid double taxation?

Falian

Falian

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Nov 2, 2007
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Hey guys,

I'm trying to find resources that talk about LLC/S-corps owning other companies without being double taxed.

For business structuring, It can be ideal to have a separate LLC that's partially or wholly owned by your main LLC.

I haven't found any info on whether the child LLC can pass profits to the parent LLC without those profits being taxed. Can anyone help me out with this?
 


Falian your best bet would be talk to your accounting! It's money well spent. I have 2 sCorps and my accounting makes sure I pay less possible amount without getting flagged by IRS.
 
other than the fact that llcs are pass through and never get taxed directly, you could just talk to your tax guy whod reveal the simple trick
 
Yes, guys, i'm well aware that a CPA can answer the question. I'm looking for online resources or WF members who are actively doing this so I can be informed when I go talk to the CPA.
 
profits from a LLC are passed through to the holders. You'd file your earnings on a Schedule K and pay your taxes at your personal tax rate accordingly.
 
jvincent said:
profits from a LLC are passed through to the holders. You'd file your earnings on a Schedule K and pay your taxes at your personal tax rate accordingly.
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I understand how an LLC works. I'm asking if anyone knows what happens if an LLC owns another LLC and the child LLC distributes profits. Does that get passed to the parent LLC untaxed?
 
You really need to talk to a tax lawyer/accountant - Laws on LLC/Scorp vary by state
 
Falian said:
I understand how an LLC works. I'm asking if anyone knows what happens if an LLC owns another LLC and the child LLC distributes profits. Does that get passed to the parent LLC untaxed?
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er no, if it's a partnership your portion of the profits pass through to you
 
i have an s-corp that is a member in an LLC with another partner's s-corp (single LLC, two members are both s-corps). the profits pass thru them all, no double taxation. LLC gives me better liability protection, the s-corp limits my SE tax.

and yes, it was approved my my tax lawyer & CPA.
 
As far as I know, and I'm not an accountant - Taxes paid on S-corp distribution are done on a personal level, not a corporate level. So the LLC that actually generates the profits would never pay taxes on this distribution, only the share holder would pay taxes. I see no difference if the shareholder is a person or company. So the answer is no, I don't believe you would be taxed twice.
 
Pozzy said:
As far as I know, and I'm not an accountant - Taxes paid on S-corp distribution are done on a personal level, not a corporate level. So the LLC that actually generates the profits would never pay taxes on this distribution, only the share holder would pay taxes. I see no difference if the shareholder is a person or company. So the answer is no, I don't believe you would be taxed twice.
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correct. LLC's and s-corps are always pass-thru entities regardless of how many layers it must go thru until it gets to the individual owner/member.
 
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