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I have an S-corp which owns 30% of an LLC that offers design…

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I have an S-corp which...
I have an S-corp which owns 30% of an LLC that offers design services.Since both of these companies will flow to my Schedule E Part II. Shall i single out the LLC as its own line or lump it into the S-Corp's line?
Submitted: 7 months ago.Category: Finance
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1/1/2018
Financial Professional: Lane, JD, CFP, MBA, CRPS replied 7 months ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 14,901
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Hi!

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If the S-Corp OWNS the LLC. Then the LLC will generate income that flows to the gross receipts.

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The LLC must be a multiple member, so files a 1065, and gives the S-Corp a K-1 for the 30% distributive share or profit.

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That, then, is a revenue for the S-Corp. The S-Corp, then has its own expenses on the 1120-S.

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Then THAT profit is what flows to the Schedule E

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Financial Professional: Lane, JD, CFP, MBA, CRPS replied 7 months ago

Please let me know if you have any other questions AT ALL before rating me.

...

If this has helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit") … That’s the only way JustAnswer will compensate me for the work here.

...

But if you need more on this, please let me know.

Lane

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Customer reply replied 7 months ago
Hi Lane,Thanks. A related question, I originally owned the 30% of the LLC personally. In the middle of the year, I started the S-corp with the intention of capturing all of my income from multiple companies (such as this 30% LLC) into one place and contribute to my solo 401k.From my point of view, I'm contributing the ownership of the LLC to the S-corp. Is this a taxable event? What paperwork do i need to document such a change?
Financial Professional: Lane, JD, CFP, MBA, CRPS replied 7 months ago

NO, you nave it exactly. The value of the property becomes the corporation's basis in it when it is donated or transferred to an S-corp.

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The value of that property is also added to the capital account of the shareholder who contributed it.

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Financial Professional: Lane, JD, CFP, MBA, CRPS replied 7 months ago

You should document the changes in the LLC operating agreement. And show the LLC interest on the S-Corp's balance sheet

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Financial Professional: Lane, JD, CFP, MBA, CRPS replied 7 months ago

Remember, however, the the basis for solo-401(k) contribution is SALARY, not S-Corp gross income

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Financial Professional: Lane, JD, CFP, MBA, CRPS replied 7 months ago

By the way, here's a really good overview by ***** ***** (an EA) Lots of stuff out there isn't accurate, but I've never found home to be wrong: https://www.thebalance.com/donating-property-to-an-s-corporation-3193484

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If this has helped, and you DON’T have other questions … I'd appreciate a positive rating, using the stars on your screen, and then clicking “submit"– That’s the only way I’ll be credited for the work.

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Customer reply replied 7 months ago
On my 2017 LLC tax return, do i need to report this change of ownership (from 30% owned by me personally to 30% owned by my S-corp). Does it incur any tax consequence on me personally or on the LLC or the S corp?
Financial Professional: Lane, JD, CFP, MBA, CRPS replied 7 months ago

No, it just changes how/what you'll report.

...

You need to change the operating agreement or the LLC and again you'll change what it is that the S-Corp owns. owns

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