- quote -

A partnership cannot be a shareholder of an S-corporation,
nor can a C-corporation. Sec. 1361(b)(1)(B). Unless your LLC
is a "disregarded entity" with only 1 (or H&W) member, it
will be treated either as a partnership or as a C-Corp and
that will explode the S election. In addition, making uneven
ad hoc splits in distributions will likely violate the "no
second class of stock" requirement for S Corps.

Folks organizing a business should remember Occam's Razor:

"Entia non sunt multiplicanda praeter necessitatem" --
"Entities should not be multiplied beyond necessity."

Bob Daniels

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- quote -

Thanks for the reply.

The reason for Nevada is as follows. I am starting a
one-time company to produce a small film. I have a few
investors who wish to maintain their privacy since they are
connected to the subject matter of the film. Thus the wish
for a Nevada holding company. Nothing to do with avoiding
tax, etc.

- quote -

The budget for the movie is extremely tight and every penny
counts. We need the membership structure of an LLC, but it
costs extra thousands to go through the mandatory
advertising requirement for an LLC in NY. It's far cheaper
to form and maintain (franchise taxes) an S-Corp in NY, but
then we don't have the privacy and ability to make uneven ad
hoc splits in distributions. Thus my idea of forming the NV
LLC which owns the NY S-Corp. I thought of a Nevada LLP but
the same advertising requirements apply for operating in NY.

Now if I do go ahead with this, would there be a need to
register the NV LLC as 'doing business' in NY? Technically
the NY S-Corp would be doing all the business, and all net
profits (after NY and Federal taxes) would flow through to
the NV LLC, so it wouldn't be doing business in NY as such.

Thanks for your thoughts.

Marco

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"/brian" <codfish[at]cotse.net> wrote:

- quote -

"/brian" <codfish[at]cotse.net> wrote

There's no reason you can't do that, as long as the owners
of the LLC are all qualified shareholders. Obviously a
Q-Sub election would also need to be made by the subsidiary
corporation. I don't know enough about NY taxation to know
if there would be any difference in the reporting at the
state level.

Brian Bivona, CPA

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- quote -

The first question I ask my clients is to give me one reason
why, if you live in NY, you would want to incorporate in NV.
I am presuming you are small and just starting out.

- quote -

Which begs the question: Why not incorporate in NY. You
will have to register there anyway if you are doing business
there.

- quote -

This is actually more of a legal question. The answer would
require much more information than you gave. If you can
legally set up the entity, then sure, it can be taxed. But
before you try this, you might ask yourself questions like:
Why do I need more than one entity? Why would I want an LLC
over a Corporation? Is an S-corp appropriate for what I am
doing? How do you need to limit your liability, and which
form of business meets your particular needs best.

The answer to your question? Sure, why not. But I would
need to know a lot more information to determine if that
were the right thing to do.

Bryan

--
-------- Bryan Kellar, EA
Oregon Tax Help, Inc. Portland, Oregon
www.oregontaxhelp.com
www.canadatax.org

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"Brian" <bpbiv[at]yahoo.com> wrote:
- quote -

Why not just check the box to be taxed as a C-corp and elect
S status for the LLC? Then it can own the s-corp as a
q-sub. Am I missing something here?


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"news" <news[at]news.newshosting.com> wrote in

- quote -

Yes, with a caveat. S Corporations can only have
individuals and certain estates and trusts as shareholders.
If you are the sole owner of an LLC, tax law treats it as a
"disregarded entity." That means that anything that the LLC
owns, you, as its sole owner, are deemed to own directly.
Thus a single owner LLC that is owned by an individual may
own shares in an S corporation. If the LLC has more than one
owner, it generally becomes a partnership at that point and
becomes a disqualified shareholder of an s corporation. If
someone other than an individual or qualified trust becomes
the owner of the LLC it also then becomes a disqualified
shareholder.

As a disregarded entity your LLC will not have to file a
federal tax return, although it may need to file one for
state purposes. The income of the S corporation will be
reportable in your personal return directly.

Brian Bivona, CPA

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"news" <news[at]news.newshosting.com> wrote:

- quote -

Since the LLC will be doing business in NY, you will have to
register it in NY regardless of who (or what) owns it.

Why complicate your life by organizing it in Nevada anyway?
Contrary to popular belief, that will not get you any state
income tax benefits as long as you live in NY or the LLC
conducts its business in NY.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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"news" <news[at]news.newshosting.com> wrote:

- quote -

Unless the LLC is a single member LLC, no. Which begs the
question, if you plan on forming a NY S-corp, why bother
with the Nevada LLC?

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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Hi, any advice would be appreciated.

I am looking to start a new business in my home state of New
York. For various reasons, I wish to form a Nevada LLC and
then register it to do business in New York.

Unfortunately, formation of an LLC or registering a foreign
LLC in New York is very expensive, due to the increased
filing fees and the requirement that one advertise the
formation for six weeks in two newspapers.

Could I form a Nevada LLC and a New York S-Corp, have the
LLC fully own the S-Corp, and then flow through all earnings
from the S-Corp to the LLC and then on to me?

Thanks in advance,

Marco

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