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Anne_C
Anne_C, Attorney
Category: Business Law
Satisfied Customers: 2302
Experience:  Business litigator, 15 years' experience
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If one LLC is owned by another LLC, what are the tax

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If one LLC is owned by another LLC, what are the tax benefits? do they both need tax id's? which one should open up a bank account? which one should pay the payroll to employees? which one should issue W9's? If both LLC's are based & located in nevada and do business in both nevada and california, should income be tracked/reported by state?

Dear Express Bookkeeping:

(1) If one LLC is owned by another LLC, what are the tax benefits? A: That really depends on a lot of factors, especially whether or not the LLC'S will owe taxes at all. If neither of the LLC'S would owe taxes, there would not be a benefit -- both LLC'S would have to pay the state's minimum LLC tax. You should discuss the particular type of business each LLC is engaged in with a qualified accountant to determine what tax benefits might exist. Keep in mind that limitation of liability is another important factor, above and beyond taxes, for forming an LLC.

(2) Do they both need tax id's? A: Yes. Here is the IRS website on EINs: http://www.irs.gov/businesses/small/article/0,,id=102767,00.html.

(3) Which one should open up a bank account? A: Your business bank will require that both open up bank accounts to have separate LLC names on the checks.

(4) Which one should pay the payroll to employees? A: The LLC that the employee is working for should pay the payroll. If an employee is working for both LLC'S, then each LLC should have a payroll. There are other ways to set this up. For example, one LLC could contract its employees to the other LLC so only one would pay payroll; and the LLC that contracts with the other LLC would have to issue a 1099 to the LLC providing the employees.

(5) Which one should issue W9's? A: W9's aren't issued - those are proof of an employee's right to work in the United States. If you are asking about W2's, the LLC that pays the employee should issue the W2. If both pay the employee, both should issue the W2.

(6) If both LLC's are based & located in nevada and do business in both nevada and california, should income be tracked/reported by state? A: Yes, as the LLC will need to pay the necessary taxes to the appropriate state.

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