Hello, I will be assisting you
Will you be the sole shareholder / owner at this time?
and which company (or companies) will you be drawing a salary from (if at all)?
Yes, sole owner
salary from business two
business two will pay royalty to business one each month and I will eventually draw from the business one account
I can see drawing money from the business one account at the end of the year, leaving enough to sustain business one
s-corp is a limited entity and one its limitations is that a non-person cannot be a shareholder therefore business one cannot be an s-corp since if business two is an s-corp it would mean that an s-corp is a shareholder
for that matter business two cannot be an s-crop either because it will be owned by one
therefore you are left with either both being LLCs, both being c-corps or business one being s-corp and business two being LLC
the advantage of an s-crop over an LLC (especially a one member LLC) is that in an s-corp one is permitted to draw a reasonable salary and be taxed at ordinary tax level and then draw out the remainder as capital gains at a lower rate
unfortunately this would not be available in business two because it will be owned by business one. As a one member LLC you the SS+Medicaid taxes are not deductible which does result in a higher tax burden
if you are willing to take a salary from business one instead of business two then you could have business two an LLC and since it's a pass through entity redirect all the profits (and losses) to business one who would be an s-crop. In the s-corp you would then draw a reasonable salary and take the rest and dividends taxed at the lower capital gains rate rate
as far as the agreements, as you noted correctly you would some sort of a licensing agreement between the companies. Each company will needs its own operating agreement (for LLC) and by laws (for s-corp). Each company will also be making its own tax filing.
The good news is that both LLCs and s-corps are pass through entities so no double taxation despite the fact that there are two entities
as you can see this is a fairly complex structure and will result in significant costs as far as putting in place the legal paperwork and accounting. You should consider waiting on setting up a holding company until in fact you have more than one restaurant under company two.
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