Thread: LLC and personal taxes

hi everybody,

Single person LLCs file the same as a sole proprietorship.on your Schedule C of your personal 1040.If you are going to owe more than $1000, yes you should have been making quarterly estimates. It is too late to do that now for 2006 and the 1st estimate for 2007 is due 4/15.

Every year I threaten someone with an examination relating to single member LLC (SMLLC) Schedule C
filing theory, a.k.a.: entity disregarded as separate from owner (Sec. 301.7701-3(b)(1)(ii)).

Investment SMLLC: Active versus Passive LLC income
Example 1
Single member LLC invests in:
...Real Estate Investment Trust mutual funds
..."Day trading" option sales
...NYSE stocks held for minimum of 180 days

Example 2 SMLLC
Developer forms SMLLC. Funds LLC with $100,000 cash. SMLLC loans $100,000 to XYZ Inc. for
development of a building for rent receiving a Promissory Note at 7% in return with an option to
purchase 10% of XYZ Inc. in 36 months. SMLLC performs no services nor conducts any sales.
Q: Is SMLLC a Schedule C "Small Business" Filer if the SMLLC restricts activities to
activities classified as nonbusiness investment?

Do we advise the person to file Schedule C (small "business"). Remember, a "business" excludes
certain passive investing activities. If the LLC is a Single Member LLC (SMLLC) is Schedule C
appropriate to express income from nonbusiness sources.

Welcome,

If it's treated as a partnership it will file a Partnership Return on Form 1065 and any income will flow directly
to the partners' personal tax returns. If the LLC paid your personal tax bill it would not be a deductible business
expense and all partners would therefore share in the payment of your tax bill.

"If it's treated as a partnership it will file a Partnership Return on Form 1065"

Nonsequitor Alert. Reread my question.
I reference A SINGLE Member LLC with NONBUSINESS INCOME from passive investment activities.

'1065 Filers are limited to MULTIMEMBER LLCs. Obviously Single Member LLCs are ineligible for partnership
classification.

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