(how it works?) Single-member S Corp as a parent company for a single-member LLC

[k1993]

Hi 🙂

We have a single-member S Corp (lets call it AAA Inc) and we need to open a second smaller company (different name and different EIN). The easiest way to open it, would be opening LLC under an individual name. But we thought why would not open LLC (lets call it BBB  LLC) under our S Corp? And I got confused a little bit and now have some questions.

1. All income and expenses of the BBB LLC would go to the "AAA Inc" 1120s or business owner's 1140? I am assuming it would go to the 1120s.

2a. If we need to send w9 form from BBB LLC, would this form have name and EIN of BBB LLC or AAA Inc? I am assuming BBB LLC.

If the clients report 1099-misc to IRS, how can I prove the same income from my side? I just run TurboTax Business for the previous year, and it does not have anything what would ask income for a specific EIN.

I am guessing, when we apply for EIN, IRS asks who is responsible party of the LLC, and when we say "Existing business", IRS just summarizes the income of S Corp and LLC?

So, basically my personal tax return (1140) would not be different from the last year? It would have the same W2 and Schedule K?

Not important question:

3. If we need to hire a contractor for our LLC, from whom would we send 1099 from? From S Corp or from LLC?

Thank you very much.

[Carl]

There's no such thing as  "single member" S-Corp. AN S-Corp is an S-Corp, be it with one owner or a hundred owners.

I suspect that what you have is a single member LLC for which you filed form 8832 with the IRS to treat your LLC "like an S-Corp" for tax purposes. If so, that's *ONLY* for tax purposes, and nothing else. I would *HIGHLY* recommend you see a tax professional, as the laws governing S-Corps differ state to state. The penalties for doing things wrong can be quite costly and make the cost of professional help seem like a pittance in hind sight.

[k1993]

Hi.

No, we filed C corp with 2553.

LLC I am talking about is completely different company.

[Carl]

Thanks for clarifying. Your reference to "single member" S-Corp led me to suspecting it was a single member LLC that you elected to "treat like an S-Corp" for tax purposes. With the form 2553, it's not "treated like" anything. It is "in fact" an S-Corp. Now while I know the "general" way of dealing with this on the tax front, I've looked at TurboTax Business and just can't seem to figure out how to correctly deal with this in the program. I suspect that's because it depends on what state you are in, since laws for all the different business types do differ state to state, and my state doesn't tax personal income.

I would suggest you post the particulars of your situation in the TurboTax AnswerXChange forum at https://ttlc.intuit.com. I have many colleagues in that particular forum who are much, much more knowledgeable on your situation, than I could ever hope to be. But don't be surprised if they still advise you to seek professional help, since laws do differ from state to state.