lfred wrote:

- quote -

Not really enough information here, but generally, LLC's are
better for no SE Tax type activities like certain real
estate ventures. With an LLC you and your wife will be
filing a federal 1065 subject to FICA, and that may cost you
more than being, say an S corp with both of you on payroll.
If your income is high enough that the max FICA doesn't
really matter, then being an LLC for SE vs. Non-SE purposes
really doesn't matter anymore. Would need to have some
figures (estimated taxable income) on this first to
calculate your best alternative vs S corp, C corp etc with
the variable you mention. Depending on taxable income, the
LLC option could be moot. Sorry for quick response, have to
leave =)

john h. outlan, cpa
http://users.adelphia.net/~joutlan

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vasant_alfred[at]msn.com (Alfred) wrote:

- quote -

Tax law does not recognize LLC's per se. They can be taxed
either as a corporation or as a partnership. If taxed as a
partnership there are certain things, like medical
reimbursement, that you will not be able to take whether
it's a one-person LLC or not.

Stu

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I am considering creating an LLC in Colorado. My wife and I
would like be partners, but I am concerned that by doing so,
we will not be able to take advantage of many non taxable
fringe benefits that would be available to owners of C
corps. From what I have been reading, we would not be able
to have a deductible medical reimbursement plan and there
would be restrictions on a deductible day care expenses plan
--since we would be the owners.

Do the IRS statutes severely curtail LLCs providing non
taxable fringe benefits to members/partners? Should I
reduce my wife's participation to, say, 10% (or 1%) and then
have her be an employee of the LLC? (so that she can have
receive full benefit of heath insurance and day care
reimbursement -- and through her, our family?) Or is even
this lower level of participation too much? Is this a way to
get around the major restrictions on fringe benefits
available to owners/partners?

My wife will be a passive member. In other words, she will
not be involved with any decision making at all. Would it
be appropriate to have her as an employee (with W-2 income)
to do filing, record keeping, data entry, etc?

Of course, I could avoid all this brainstorming by just
forming a one member LLC (me alone). But we would prefer to
be a partnership so that we can show income and expenses on
a 1065 rather than a Sched C.

I could also have my father or a brother (in a foreign
country) be members (and my wife an employee of the LLC with
no membership/partnership stake). But I am not sure how
income to non citizen (and non resident) partners/members
would be taxed. In such an arrangement Is it essential that
all, members receive distributions? If so, how would these
distributions be taxe? The non resident father and brother
do not file US tax returns.

Any suggestions would be greatly appreciated.

Alfred.

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