Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

Sorry, one more question. As my friend suggested me that

Sorry, one more question. As...
Sorry, one more question.

As my friend suggested me that I could even use partnership, he could own 1% of my LLC. His point is that way i will fill taxes via EIN and also use K1 to fill taxes return, it will have more benefit rather than sole proprietorship - use SSN to file taxes. Because I will have more choices on taxes deduction.

I'm not sure if he is right, just wanted to double check. As my husband is have LLC but partnership with his other 2 partners.

Please let me know if my friend's idea is right or wrong. Thanks!
Show More
Show Less
Ask Your Own Tax Question
Answered in 12 minutes by:
7/15/2013
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,131
Experience: Taxes, Immigration, Labor Relations
Verified

LEV :

Hi and welcome to Just Answer!
That suggestion is correct.
However - you woudl need to amend your LLC documents - and convert the single member LLC into teh LLC with two members.
In this case under default rules the LLC will be treated as a partnership.



A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.




A partnership must file an annual information return to report the income, deductions, gains, losses, etc., from its operations, but it does not pay income tax. Instead, it "passes through" any profits or losses to its partners. Each partner includes his or her share of the partnership's income or loss on his or her tax return.




Some additional information about partnerships may be found in IRS Publication 541 - http://www.irs.gov/publications/p541/index.html


Then - each partner reports pro-rata share of income on his/her individual tax return.




All business income and expenses are reported on the partnership tax return form 1065 - http://www.irs.gov/pub/irs-pdf/f1065.pdf


Partnership should issue schedules K-1 to each partner reporting pro-rata share of net taxable income - http://www.irs.gov/pub/irs-pdf/f1065sk1.pdf


LEV :

There will NOT be more choices on taxes deduction. All expenses must be deducted on the partnership tax return - form 1065. You will report income passed to you from the partnership on schedule E and it will be subject of self-employment taxes. There would not be any tax benefits - but legally - that woudl be a different business entity.
There will be some additional overhead for filing a partnership tax returns. So - if you choose this route - be sure all returns are timely filed.

Customer:

Thank you so much for this explanation. So for my situation, which way is better choice? Either sole owner or partnership? My friend would join me to my LLC. The good thin for partnership is i don't need to pay income tax, passes through any profits or loses to partners, I think it's better than sole owner? Should be more flexible on taxes, right?

LEV :

Because the partnership is a pass through entity - means all income or losses are passed to partners - the result woudl be eccentrically the same as with the solo proprietorship - the net income will be included into your personal tax return and will be subject of self-employment tax - so from income tax prospective - I see no difference.
There is no additional flexibility but there is an additional overhead for filing income tax returns of the partnership.

Customer:

Sorry, i hope i didn't ask you too much.

Customer:

Sorry, are you still in?

Customer:

Sorry, I didn't see your answer until now. Thank you so much! So I would stay Sole owner ship.

LEV :

I generally suggest to keep things as simple as possible - and as a starting point - you better to be a disregarded entity reporting all your income and expenses as a solo proprietorship.
However - when your income will bypass $50,000 - you might want to choose the LLC to be treated as S-corporation. There will be additional overhead for filing S-corporation tax returns - but a part of your income will be passed from S-corporation without self-employment taxes - so there would be potential saving.

Customer:

My income right now is over $100,000

Customer:

But again, as i paid by commission, most time would over $50,000, sometimes might less than it, if have a bad year, hard to say.

LEV :

When I mentioned $50,000 income level - I meant - net income after deducting all possible expenses.
If yes - you might benefit from selecting S-corporate treatment.

Customer:

Yes, i don't have much deduction on my expenses so far, i paid very high taxes on 2012, that's why i opened a company LLC, thought might be possible could use it to deducted more on taxes.

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,131
Experience: Taxes, Immigration, Labor Relations
Verified
Lev and 87 other Tax Specialists are ready to help you
Ask your own question now
Ask Lev Your Own Question
Lev
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,131
30,131 Satisfied Customers
Experience: Taxes, Immigration, Labor Relations

Lev is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
Can I report rental income in my tax return on a property
Can I report rental income in my tax return on a property thar is owned by my father? He does not live in the US is not a US citizen and can sign a document to allow me to receive the rental… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
Filed W1040 for self-employment. Should I file amended return for HSH?
I was self-employed last year and I filed a W1040 tax form. Everything went through well. I did it through an H&R computer program. Currently I am in need of financial aid as I am going to college. I … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
For a ny state partnership tax return, if you file an
For a ny state partnership tax return, if you file an extension but don't pay anything and then end up owing a lot. Do they still recognize the extension or do they charge a failure to pay penalty (fo… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Form 1120, cash basis. If Taxes paid to IRS are deductible,
Form 1120, cash basis. If Taxes paid to IRS are deductible, are refunds for overpayment the equivalent of income?… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
717 satisfied customers
I have a schedule e form that I filed for extension (2016).
I have a schedule e form that I filed for extension (2016) . I attempted to send in time online but was thwarted by my own incompetence to follow directions basically. I saw that if I used a free form… read more
Lev
Lev
Tax Advisor
30,131 satisfied customers
I filed for an extension to file my 2017 income tax return.
I filed for an extension to file my 2017 income tax return. I recently suffered a stroke - 6 weeks ago - and have been unable to finalize my return. I should be able to file it within the next 30 days… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,452 satisfied customers
I'm doing my 2016 individual tax return. I sold my home in
I'm doing my 2016 individual tax return. I sold my home in 2016. I rented rooms in my personal residence (which I sold in 2016) I took depreciation. I understand that I am subject to depreciation reca… read more
Amanda Russell
Amanda Russell
Accounting Tax & Profit Strategist
Master\u0027s Degree
9 satisfied customers
If my Schedule E loss is disallowed for a rental property
If my Schedule E loss is disallowed for a rental property (due to income level), can I take the mortgage interest and real estate taxes paid on Schedule A instead of on Schedule E?The entire expense a… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
717 satisfied customers
Income from the leasing of cars...is it self employment
Income from the leasing of cars...is it self employment income? … read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Adjusted individual tax return for 2014(Iowa),says no
Adjusted individual tax return for 2014(Iowa),says no response to letter of inquiry,disallowed health insurance. deduction.says my wife and I owe$600.00.she called # and was told to show proof of insu… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Can house maintenance and property taxes be deducted on form
Hello. Can house maintenance and property taxes be deducted on form 1041 for a house owned by decedent prior to the Executors selling it? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I'm trying to figure out how a partnership "deducts"
I'm trying to figure out how a partnership "deducts" contributions to a partner's retirement plan … read more
Lev
Lev
Tax Advisor
30,131 satisfied customers
I am finalizing a personal tax return and my client has 8 or
I am finalizing a personal tax return and my client has 8 or 9 K-1 forms from operating companies that he owns. One company that i do not prepare issued a K-1 with a line 1 income of $242,089 and a se… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
717 satisfied customers
I am preparing a partnership tax return for 2016. The
I am preparing a partnership tax return for 2016. The partnership holds commercial rental property. one of the partners, 50%owner, passed away in April 2016 and left his interest to his spouse. i woul… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
A Nevada partnership (LLC form in Nevada) own property in
A Nevada partnership (LLC form in Nevada) own property in Nevada. in 2016, the partnership hire a manager in California to manage Nevada rental property (this manager is show on the Nevada Secretary s… read more
Lev
Lev
Tax Advisor
30,131 satisfied customers
Deductible unreimbursed partnership expenses are deductible
Deductible unreimbursed partnership expenses are deductible on Line 28 of Schedule E. In this case the expense is a tractor with a cost of $ 25,000.00. This is a depreciable asset and would not normal… read more
Matthew Breecher
Matthew Breecher
President
MBA (Graduate Legal Studies)
285 satisfied customers
I am preparing the personal tax return for my employers, and
I am preparing the personal tax return for my employers, and I just found out they operate an LLC. What is the rule of thumb for determining whether to elect to be taxed as partnership or corporation.… read more
Matthew Breecher
Matthew Breecher
President
MBA (Graduate Legal Studies)
285 satisfied customers
Is a tax refund on a decedent's individual tax return
is a tax refund on a decedent's individual tax return includible in the decedent's estate (Form 706) AND/OR the decedent's estate income tax return (Form 1041)? … read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
717 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x