Dear Viper4Me,
This may not be as hard as you think.
Let's take your questions one at a time:
Q. 1. a) Can an LLC own more than one business or other LLC without having
to form separate LLCs or business entities?
A. Yes, it may.
Q. 1. b) Does it have to be under my SS# in addition to the EIN#?
A. The LLC will operate under it's own taxpayer identification number.
However, if it is a one-owner LLC, it will be treated by IRS as a disregarded
entity and must be reported on the "member's" personal income tax return,
generally on Schedule C. So, if you're trying to separate yourself from
the business, an LLC won't help you.
Q. 2. a) Can a living trust own the LLC or be the single member instead of
me?
A. Yes, it can. But a living trust doesn't get a tax identification
number. They operate under your own Social Security number. They are just
a way to hold title - not exactly a separation from you. So, again, if you're
trying to separate yourself from the business, an LLC won't help you.
Q. 2. b) My adult trusted son is the trustee and beneficiary of my trust.
I am not on the trust.It is revocable at present but I have no probelm in
making it irrevocable as long as I can operate the business and leave
it to and protect my family.
A. Why don't you do something simpler? Establish an S-Corporation with
your son as the owner, and youself as an employee. That will operate under
its own taxpayer ID number. You can either draw all the profits as wages,
or let your son pay tax on the profits you don't draw. You can reimburse
him.
This will keep you separated from the ownership of the business until you
finish paying off the debts. You can take it back from your son once you're
all caught up. And,not being an owner, there will be tax advantages that
owners don't have - like being able to have the company deduct the cost
your and your family's health care, retirement, etc.
Spend some time with a good tax professional to work out the details.
Read a couple of books - see Amazon's top choices for a search of
"small business taxes" - You'll get some excellent guidance - cheaply.
http://www.amazon.com/exec/obidos/search-handle-url/index%3Dstripbooks%3Arelevance-above%26field-keywords%3D%252522small%252520business%252520taxes%252522%26store-name%3Dbooks/102-3432082-2821741
Anyway, that's would I would do.
Best wishes,
Your TaxMama-ga |
Clarification of Answer by
taxmama-ga
on
26 Apr 2005 17:47 PDT
Dear Viper
Thank you very much - for the comments and the generous tip.
First, let me comment on the ID#.
Typically, Living Trusts don't use a separate ID#.
But you may request one.
Various other trusts do.
As to liability - Living Trusts don't really protect you from
very much, as far as I know. However, family trusts and other
irrevocable trusts will. There was a court case just recently
where the court even allowed an IRA in a trust to be protected
from creditors. Usually, that kind of protection is reserved for
employer plans, like 401(k)'s and pension plans.
Can the trust be liable for debts or acts of the operators of
the LLC or S-Corp? There is no absolute answer. It depends on
how well the records are kept and how well the LLC's or S-Corp's
transactions are separated from the trust or the owners.
I know that I have been able to pierce the veil of a corporation
and get a judgment directly against an officer because she used
the corporation as her own personal bank account. AND because her
actions directly led to the company not paying me. I was just a
kid in my 20s at the time. And she really got me mad - and ripped
off her partners.
So, you see, it doesn't take a genius to pierce a corporate veil.
Just someone with a grievance. So, sorry - no absolutes. Do everything
right - cross all the t's; dot all the i's - and you'll be able to
protect the trust's assets.
Naturally, trusts, LLCs and S-Corps may all own subordinate entities.
You'll file a consolidated tax return for all the entities. Your
LLC or S-Corp may turn into a holding company. And naturally, each
entity operating under a different name will have to file for it's
own DBA - otherwise the banks won't accept any checks made out to that
entity's name. If you were filing as a plain, old C-Corporation, you'd
have to watch out for holding company rules. But I don't think you should
have a problem with a pass-through entity like an LLC or S-Corp.
Regardless, you're trying to do some complex stuff.
You want to make sure of all your protections.
Please be sure to get an attorney in your corner to draft documents
properly to avoid liability. And a good tax advisor for the financial
end of things. You have a lot at stake.
Take good care of yourself.
Best wishes,
Your TaxMama-ga
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