Multi entity confusion

[BHoffman]

I have an AZ LLC with its single member being a DE LLC.  The single member of the DE LLC is a DE Corporation.  The AZ LLC is a construction contractor.  The DE LLC does nothing except hold the interest in the AZ LLC.  The DE Corp does nothing except hold the interest in the DE LLC.

Since the AZ LLC is a single member disregarded entity, what form is used?  I'm thinking the operations are reported on the DE Corp 1120 and there are no tax returns filed at all for the LLCs but that seems strange....any advice?

[ILLMAS]

Flow-chart please

[Gail in Virginia]

From a federal standpoint that seems correct - the AZ LLC is disregarded to the Delaware LLC which is disregarded to the Delaware Corp. which must file an 1120.  I know Delaware is considered a tax haven for corporations, but I assume some kind of Delaware and Arizona return would need to be filed.

[jklcpa]

I agree with Gail and was typing out the same thing.

If I understand correctly:  AZ contractor is AZ LLC -->owned by DE LLC -->owned by DE corp.

If that is the case, I see your logic in reporting on the DE 1120, and then you have the apportionment that will work back to zero activity within the State of DE and no tax due to DE.  So the DE corporation will file a Fed 1120, DE 1120 apportioned to zero, and whatever AZ requires for the corporation.

[BHoffman]

Update:  I got the ownership info for this new client from the AZ Corp Commission website.  NOW they are telling me that they intend to change the AZ LLC to a multi member, so it will a 1065 after all. I'm so glad I gave them a high estimate of fees with a retainer up front.