Have a Tax Question? Ask a Tax Expert
This one came to me first. Are you looking for other experts' opinions?
I don't know why it went out to everybody
I just sent it to you
do you have an answer?
Don't worry about it. It really wouldn't matter either way. If you put someone besides your wife in at 1%, that's 1% of the income that you won't have. I'd still go with the partnership approach, so you won't have to file as a C-Corp. Filing as a C-Corp means there will be corporate income tax, and the funds beyond your salary that are taken as distributions will be taxed as dividends. This is not the case with a partnership.
But would the IRS and creditors disregard it if my wife was the partner?
No, they would not.
But, an LLC would be considered a C-Corp unless you elect to have it treated as an S-Corp. Either way, you'll have more issues doing this than if you form an LLP.
Please read that those last two sentences you just wrote.
How would an LLC be treated like an S-corp?
Remember, my existing S-corp is an insurance agency and is separate.
Forming an LLC with more than one member makes it a corporation. Every corporation is a C-Corp unless you elect to be treated as an S-Corp.
Do you have any more questions about an LLC?
I'm back now. Just finished eating with my daughter in my lap.
Do you have any other questions?
If the LLC elected to be taxed as an S-Corp will it be subject to the dissolving provision if it derives more than 25% of its income from rents (passive income)?
You're right. I was talking about general tax issues. Sounds like you need to treat the LLC like a partnership. Thanks again, Bill.