LLC Pass through (single member)

[Pacun]

Client has two houses, one is rented (she actively participates) and the other is used 50% for a daycare that she operates and she lives on the other half.

When I filed her Federal taxes, she has income of about 28K from taking care of the children and a loss of 15K from the rental. She owes SS taxes on 1040 for about $3,500 and that's it.

DC requires a business form for the rentail activity and now another one for the LLC. Each form has a minimun tax of $250. It seems that just because she opened an LLC, now she has to pay LLC taxes to DC on the $28K and $250 minimum on the rental loss.

I do understand that you are not in DC but I wonder if other states have similar taxes and how you would file the state returns.

In priior years, it wouldn't matter because DC would require only $250 minumum tax on the rental activity and the rest would be a normal return. With the existence of the LLC, her situation seems to have changed. Do you think the LLC (which was formed for the daycare) can carry the rental activity? I know the answer is no, but I will appreciate your comments.

[Jack from Ohio]

File the required taxes, and advise your clients not to listen to the LegalZoom.com commercials and also to consult with their tax professional about the tax implications of such moves BEFORE they make them. Even attorneys will suggest LLC's with no consideration of the tax consequences.

[jainen]

>>I wonder if other states have similar taxes<<

In my state the minimum tax is $800.

[Randall]

Ky has $175 minimum fee and a separate Single Member LLC form for those Fed Sch Cs and Es.

[kcjenkins]

AR franchise tax for an LLC is $150

It's just a cost of her deciding to use an LLC for her business. I expect that insurance would have been about the same cost, with more protection. But it's not your fault she did set it up this way, so don't take on the blame for the bad news you have to deliver.

[Lion EA]

CT charges $250 per entity for its business entity tax, so an LLC would pay $250 on Form OP-424 no matter how much income tax it generated or whether it was a loss.

[Randall]

Anyone know about DC? Is there separate registration and tax form and fee required? I've haven't looked yet, just thought I try here on this topic.

[JohnH]

In NC, the LLC would pay a $200 annual report fee.

A corp pays a $20 annual report fee, plus a minimum $35 franchise tax.

NC would not require a separate filing for each activity under the corp or LLC, just a single annual fee for the entity.

There might be some separate local licensing fees assessed by various municipalities.

[Lion EA]

Yeah, CT also has annual report fees, different amounts for the different entities. I think an LLC is $20, partnership maybe $50, S-corp maybe $80, just guessing here. But, my point is that these are annual report fees to the secretary of state on top of the $250 entity tax to the department of revenue plus the pass-through income taxed on the individual returns. Lots of money for the privilege of doing business in CT. All the states are finding similar revenue sources.

[joanmcq]

Yup, it's expensive to be an LLC! CA seems to be the worst, but at least we are not the only state with entity fees. I'm currently trying to correct a client who's managing member decided to LLC in the middle of last year.

And got a new EIN and filed two 1065's for 2011, treating the assets as disposed of by the partnership and then picked up (at least at the new basis) by the LLC. I know I need a 565 & 568 for CA, but am not sure what to do about the two EIN's.

UGH.

[jklcpa]

It's $250 to be an LLC in Delaware. General and limited partnerships also pay $250. Corporations pay less. A more detailed explanation is in your other post about a 2-member LLC.