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LLC / S Corporation question

  • 1.  LLC / S Corporation question

    Posted 20 days ago
    Good afternoon all:

    One of my clients has a relationship with an LLC.  The LLC was single member but changed ownership in October, 2018.  It was purchased by a newly formed S Corporation (Company A) with an IRS approved year end of Sept 30 (99% interest) and an Individual (Individual A) for the other 1 %.  Since Company A is a majority partner, the LLC would automatically have a September 30 year end and file a Partnership return.

    I was originally informed that Company A's shareholders would be Individual A (with a 99% interest) along with another Individual, whom I will call B (whom would own 1%)  The other day I was told that Individual A will own 100% of Company A.    What this means that, in effect, Individual A owns 100% of the LLC - 99% through Company A which he wholly owns, and 1 % Individually.  B would have no involvement.

    I am not sure if now reporting the LLC as a Partnership is correct since though technically, there are two (2) partners (Company A and Individual A) it is in substance, 100% Individual A.  I was considering filing the LLC as an S Corporation with a September 30 year end and just have Individual A as a 100% shareholder.  I would file the S election forms with the return, understanding that the election is technically late.

    I don't want to have as a single member LLC since Individual A's 2018 tax return would have to be amended to pick up any activity from October - December 2018.  Plus, also self-employment tax issues.

    I would appreciate anyone's input or guidance on this.

    Thank you.

    Peter Scala CPA
    Huntington Station NY