Posted by John K Haslach, CPA, MST on April 25, 2004 at 06:26:11:
If profits are building up in the C corp, you have a dividend issue, if there are losses, the losses are stuck at the C corp level.
John K Haslach, CPA, MST
LLC v. C/S Corp - Posted by Dean
Posted by Dean on April 22, 2004 at 15:58:40:
Greetings, everyone.
I have a C corp which ‘manages’ all of my property-holding LLC’s. I am about to start paying W-2 wages to my two employees (they’ve been paid as independent contractors to this point). I also want to pay myself and wife a W-2 wage as opposed to taking the passive income from my cashflow properties.
Here’s the situation:
I would like my wife and I to have different benefits than my employees. I will most likely need to set up a new entity which employs my wife and I. My thinking is to pay my employees from the C Corp, and to create a new LLC (a consulting company) which employs my wife and I, and which will also pay childcare, medical, college fund, etc benefits. The C corp will pay this new LLC a ‘consulting fee.’
Does this sound like a plan? Does the LLC need to be set up with C corp privileges? How is this done? What must I be aware of? Is there a better, more advantageous way to set this up to meet my needs, both financially and from a tax standpoint?
I appreciate your help in advance.
Dean
Re: LLC v. C/S Corp - Posted by JOHN K HASLACH, CPA, MST
Posted by JOHN K HASLACH, CPA, MST on April 23, 2004 at 09:00:23:
Without going into details, the IRS generally won’t allow you to provide benefits for yourself in one corporation and none in a second where you pay employees. It generally is not a good idea to pay earned income to an LLC. It should generally be kept in an S Corporation. Finally, why do you have a C Corp instead of an S Corp managing your properties?
Re: LLC v. C/S Corp - Posted by Dean
Posted by Dean on April 23, 2004 at 22:44:45:
John…
Thanks for the feedback. To answer your question, this is what was recommended when I set this up 3 years ago. I may elect for S Corp status and save myself the double taxation should my profits exceed the 20k. Right now that’s not the case.
What are the advantages/disadvantages to each, C v. S?
Dean