LLC Income tax free to another LLC?

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LLC Income tax free to another LLC?

Account Closed
Flipper/Rehabber · The Woodlands, TX · Member since 2016 · 35 posts · 8 votes

Does anyone have income from one LLC flow directly to another LLC that they own?

I own 25% of an LLC for flipping houses and similar. I own 50% of another LLC for building homes here and there. I am thinking to open a third LLC which I would own 100% of and have my percentage of the income from the other two flow this one. Mainly for 2 reasons: vehicle bonus depreciation (that way it is not split across the partners of my other firms) and to show banks a consolidated income stream from a single source for borrowing purposes.

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Eamonn McElroy
Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
7y

The default tax classification of a SMLLC is a disregarded entity.  If you have a SMLLC own your partnership interests nothing changes presentationally or numerically for federal tax purposes.

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  • Eamonn McElroy
    Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    The default tax classification of a SMLLC is a disregarded entity.  If you have a SMLLC own your partnership interests nothing changes presentationally or numerically for federal tax purposes.

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  • Michael PlaksPro Member
    Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
    7y

    @Account Closed

    Not enough info on your existing LLCs, but I assume they are partnerships with unrelated people. If so, they will be filing their own tax returns and sending you annual forms K-1. Combining two K1s under a new LLC does not accomplish what you want. It is not combining two businesses - it is combining two investments!

    You can only claim additional expenses, such as the vehicle, against respective partnerships, splitting it accordingly. And banks will probably not treat them as combined, no matter what you do, but I'm not an expert on banking. 

    Whether it may benefit you to create a 3rd company as an S-corp is a question for a one-on-one consultation.

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    7y
    Originally posted by @Account Closed:

    Does anyone have income from one LLC flow directly to another LLC that they own?

    I own 25% of an LLC for flipping houses and similar. I own 50% of another LLC for building homes here and there. I am thinking to open a third LLC which I would own 100% of and have my percentage of the income from the other two flow this one. Mainly for 2 reasons: vehicle bonus depreciation (that way it is not split across the partners of my other firms) and to show banks a consolidated income stream from a single source for borrowing purposes.

     The way the expenses(related to unreimbursed expenses related to the Partnership) are claimed  is via Schedule E if partnership agreement expects you to treat you that way. Some partnership agreement will require you to ask for reimbursement.  However, you cannot claim bonus depreciation in this way. You probably can include the mileage deduction as the part of unreimbursed expenses, but to claim the bonus depreciation, the partnership needs to own the asset. 

    Other questions are answered by my expert colleagues.

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