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Tax-Scholar, CPA
Category: Tax
Satisfied Customers: 89
Experience:  Helping customers comply with and plan for income taxes
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I current have an LLC which I use small businesses:

Customer Question

I current have an LLC which I use for my small businesses: river guide, insurance agent and construction. I am going to arrange to have my agent commissions paid into an LLC, so that my family, or another agent can fill in for me, if needed. I have two other LLCs. Should I have my commissions paid into a different LLC than the one I am currently using, or does it matter?
Submitted: 6 months ago.
Category: Tax
Expert:  Tax-Scholar replied 6 months ago.
Hello Sue - Thanks for using Just Answers! The tax purposes a single member LLC is disregarded for tax purposes. I assume that these LLCs are single member as you are the sole owner. When an LLC is disregarded you report the activity directly on the 1040 Schedule C. Therefore there is not tax advantage of creating multiple LLCs. However for liability purposes it would be good to have separate LLCs and bank accounts for each business. The cost of forming and LLC is usually pretty low and it is worth the added liability protection. So for example if something happened on a rive trip the assets of the insurance business could not be seized. Hope this helps. I'm a tax accountant and would recommend discussing any other business law questions to the law section.
Customer: replied 6 months ago.
thank you. I am actually not the sole member, my husband is also on the LLCs. Does that make a difference? It does make sense to separate the river guide from commissions.
Expert:  Tax-Scholar replied 6 months ago.
Yes if your husband is an owner then you would need to file Form 1065 for a Partnership. Therefore creating multiple LLCs could create additional tax filings. There isn't any real tax benefit to forming multiple LLCs as the tax is paid by the members. You report the income/loss on Schedule E of your 1040. You can also have an LLC taxed as a partnership own another LLC which would be disregarded. So for example you could have Holdings LLC own River Guide LLC and Commission LLC. In this case the two LLC would be disregarded and reported all on the partnership return. There are some benefits to having two partnerships but I don't see any benefit for a husband/wife. For example with two partnerships you could share in the profit/loss at different ratios.