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Stephen G.
Stephen G., Sr Income Tax Expert
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Hi Robin, so let me ask you this - My company D&T is a single

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Hi Robin, so let me ask you this - My company D&T is a single member LLC. My new company King Pet Care LLC is a two member llc, one being Linette King a person, and 2 being my company D&T. In this situation, can money D&T gives to King Pet CARE LLC be viewed as an expense for D&T - since D& T is th majority owner (90% say) of King pet Care
Submitted: 10 months ago.
Category: Tax
Expert:  Lindie-mod replied 10 months ago.

Hello,

I'm Lindie, and I’m a moderator for this topic. I sent your requested professional a message to follow up with you here, when they are back online.

If I can help further, please let me know. Thank you for your continued patience.

Best,

Lindie

Expert:  Stephen G. replied 10 months ago.
Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything that is not clear.

Evidently, Robin is not available, so I'll try to answer your question.

Unfortunately, there would be no basis to "expense" the payments by D&T to King Pet Care LLC. These payments by D&T would either be a loan to King or part of D&T's investment in King.

Note that in the case of King you have 3 options in terms of how you report the activity of King for income tax purposes:

1. A Partnership; 2. A Regular "C" corporation or 3. An S-corporation

The easiest would probably be a partnership given the ownership interests of King.

Should you elect to file King as an S-coprporation, I believe that you would need to be filing D&T's activity as a sole proprietor as in that case the D&T LLC ownership interest would be attributed to you which would mean that as an individual, you would be a permitted shareholder of King.

I wonder why you would want to relate the two LLC's (with D&T having a 90% interest in King). There are no tax advantages to doing so & if you are concerned with liability, you have already covered that as best you can by having King operate as an LLC. In fact, you are potentially exposing D&T's assets to King's liabilities by having D&T own 90% of King.

You may be much better off just owning 90% of King directly yourself, just as you own 100% of D&T individually.

If the funds that are availble to fund King are in D&T, and you are reporting D&T as either a sole proprietor or an S-Corp, you can withdraw the funds tax free from your D&T accounts and either loan to or invest in King individually. Alternatively, you can loan the funds to King from D&T if you are operating D&T as an S-Corp.

Generally, keeping the operations separate will afford the most flexibility, particulary when there is a minority interest as the majority interest has a fiduicary responsibility to the minority and involving your other company (D&T) in the ownership of King, just complicates things as well as exposes D&T to that fiduciary responsibility.

Questions?
'
.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4011
Experience: Extensive Experience with Tax, Financial & Estate Issues
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