USA C-Corp established under LLC

[Alex M.]

I have a Delawalre LLC, which recently established a new C-corp. INC for contracting purposes. This might sound weird but I want to know what is the best way to operate in this case, meaning should INC be responsible for all the income and expense for the whole year and at the and of the year pass the profits and losses to LLC. Or if there is any other ways that are more Tax friendly please let me know.

 

[kirby]

With this set-up, you will be taxed in the C corp and then to the LLC members . Double taxation

 

[Alex M.]

Thanks Kirby for the reply. Do you have any other suggestion?

 

[smallbushelp]

Kirby is correct that there will be double taxation but only if the C Corp makes a distribution to the LLC. They're not required to. What was the reason for establishing the C Corp as opposed to just operating via the LLC? If the parties wanted more separation for liability reasons then forming the C Corp might have been the best thing to do regardless of the tax consequences.

What sort of "contracting purposes" is the C Corp going to be doing? Can the LLC provide any management or other type of services to the corporation so that the corp can pass money to the LLC and expense it? That would avoid double taxation.

 

[Alex M.]

The main reason was the parties wanted more separation for liability and obtaining a contractors license was easier under the C-corp. LLC required more liability to obtain a contractors license. Now C-crop is to perform as a general contractor for projects. We were advised that all the profits and losses should be recorded in C-corp and at the end of the year pass all to LLC. But as much as I understand we will be double taxed. What can we do to avoid this and what type of services LLC can provide to avoid this.
Thanks

 

[smallbushelp]

Is your last sentence a question? Here are some thoughts:

Can the LLC hire the management personnel and then provide management services to the corporation?
Is it possible for the LLC to hire all employees and then lease them to the corporation?
Can the LLC purchase the necessary equipment and then rent or lease it to the corp?
Can the LLC provide HR or accounting services to the corp?

What is the business of the LLC?

 

[Alex M.]

I think all of the suggestions that you listed are possible for the LLC to perform for the corporation. LLC is a development company.
Thank you for the advice

 

[smallbushelp]

de nada