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Old 03-04-2013, 12:04 PM
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LLC under C Corp

My husband and I just formed a new C Corp with the intention of going into business with that company. We couldn't find the real estate for that new company, so the C Corp business is on hold for 2-3 years.

In the meantime, we have started a mobile repair business. We were advised to create the LLC under the C Corp, so if he's sued it will protect the C Corp.

Questions:

1. We have set up the following for the C Corp:

Federal: tax id #, corporate tax return (1120 & 941), FUTA (940)
State: State tax return, sales & use tax, umeployment tax.

Q. Since we will not have ANY business for 2+ years on the C Corp, do we just keep filing ZERO returns on the C Corp like we have been?

2. Do we then need to set up all of the above for the LLC? (tax id, fed&state tax, etc?)

3. Do we pay all bills under the LLC or the C Corp?

4. Is it OK/common to have a C Corp established that is not generating revenue itself, but LLC(s) under it are?

Thanks in advance for your help,

Barb



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Old 03-05-2013, 04:40 AM
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Posts: 5,231
“We were advised to create the LLC under the C Corp, so if he's sued it will protect the C Corp.”==== Taking on the enterprise is less risky for theC corp/S corp, as corporate assets are protected from debts incurred by the LLC. So you wanted to set up a C Corp. then set up your biz as a LLC. Tax considerations, however, can be complex. An C corp/ S corp forming an LLC generally follows the same steps as individuals do when forming LLCs.


Questions:

1. We have set up the following for the C Corp: Federal: tax id #, corporate tax return (1120 & 941), FUTA (940) State: State tax return, sales & use tax, umeployment tax.
“Q. Since we will not have ANY business for 2+ years on the C Corp, do we just keep filing ZERO returns on the C Corp like we have been?”== As you are established as a C Corp or even as an S Corp, then you are required to file a tax return every year, even in years where you have no activity or no taxable income. So once you established your corporation, you should have been filing annual tax returns, even if you had no income from the business, and simply reporting no income or expenses. You must continue to file each year until you formally dissolve the corporation. You would basically fill out both forms with all zeroes for items pertaining to income and expenses.You are still required to pay teh minimum franchise tax to your state.

“2. Do we then need to set up all of the above for the LLC? (tax id, fed&state tax, etc?)”==Yes. However,an LLC owned by an S- corp or C corp provides limited liability to the parent company for the debts of the LLC. But protecting the corporation's assets can still be complex when avoiding a mingling of LLC and corporation assets. Tax issues can be even more complex for an S corp/ C corp-owned LLC. Professional legal advice is highly advisable. LLC has in recent years become the most popular legal structure for small businesses wishing to incorporate. The exact requirements vary slightly from state to state, but setting up an LLC is a relatively simple process that can usually be done in an hour or less, depending on the complexity of your organizational structure

“3. Do we pay all bills under the LLC or the C Corp?”====I guess yo need pay them in separation as said above.

“4. Is it OK/common to have a C Corp established that is not generating revenue itself, but LLC(s) under it are?”=====I guess so. Ownership of the llc is evidenced by the corp holdin all or a majority of the membership interest in a llc.I guess a C corp could own an active llc. An LLC must make a tax election to tell the IRS how it wants to be treated for federal income tax purposes. Because the LLC has only one member -- the C corp -- it can choose to be treated as a disregarded entity. A disregarded entity means that the LLC would not file its own tax returns. Instead, profits and losses would pass through to the C corp owner.



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