USA Pass-Through Taxation for Subsidiary Companies?


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I recently started a new business, I operate a retail storefront, where I do buy, sell, trade, and repair of electronics, tools, bicycles, and home goods. We operate similar to a pawn shop as we buy all of our inventory from the public. We sell 50% of our merchandise online.

So, I have a wholly owned LLC holding company. It in turn owns 3 subsidiary companies.

The first subsidiary LLC controls the retail business and all of the purchasing activity, including supplies and utilities.

The second subsidiary LLC has its own bank account, its own paypal account, and its own ebay account.

The third subsidiary LLC also has its own bank account, its own paypal account, and its own ebay account.

My one employee manages both ebay accounts, and is paid on payroll by the 1st subsidiary company.

For tax purposes, am I able to disreguard the subsidiary LLCs, and submit one consolidated Schedule C for the holding company with my regular 1040 tax return?

Or am I required to submit Schedule C forms for each subsidiary LLC as well?

Thanks!
 
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Werner Reisacher

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Yes, you can include the 4 LLC's in one Schedule C for tax reporting.
I hope you obtained professional legal, tax, and accounting advice before you set up your multi-layer corporate structure. Just trying to understand the legal structure and the way you are doing business takes some time to figure it out. The administrative work involved in keeping track of the transactions and eventually recording these transactions into the accounting of each subsidiary, eliminating intracompany transactions and reconciling the receivable/payable and credit card/bank accounts is costly - unless you are able and willing to spend all of your spare time doing it.
- Did you think about EIN numbers for the 4 companies?
- LLC's taxed as corporations would allow you to draw a "reasonable salary" W2 which might be less than the consolidated profit of the business. As sole proprietor (Schedule C) you will pay a 15,...% payroll tax on all your LLC income.
- LLC's provide you with the financial liability protection of a corporation. The way you are operating makes it almost impossible to strictly observes the rules that require a strict separation between the operation and your personal interests. You would probably find it difficult to defend your position in case of a liability lawsuit.
Unless you have reasons that justify your setup, I would try to keep the operation as lean as possible.
 
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