Topic Thread

1.  S Corp ownership

Posted 7 days ago
​​I have a client who has an S corp which is owned by a single member LLC. However, the LLC elected to be taxed as an S corp by the prior accountant. Is this allowed?

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Dominic Frandina
CPA
CASILLO & FRANDINA, LLP
Floral Park NY
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2.  RE: S Corp ownership

Posted 7 days ago
yes i believe it is provided a qualified Sub S subsidiary election is made.

let's see what others post.

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Abby Alhante
KURCIAS & ALHANTE, CPAs LLC
Melville NY
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3.  RE: S Corp ownership

Posted 6 days ago
Dominic, it is absolutely permitted and depending on the type of business, preferred.  All that was needed was the filing of Form 2553.

There are obvious pros & cons.  The pros center on having this activity off of the personal tax return and therefore less likely to be audited.  Also, the net income is not subject to self-employment taxes.  The cons are that the owner needs to draw "reasonable" compensation.  Keep in mind that many might consider this an advantage as this gets the owner to get taxes paid into his account and reduces or eliminates estimated payments.


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Stephen Mankowski
215-682-7366
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4.  RE: S Corp ownership

Posted 5 days ago
​Thank you Stephen. I was concerned because I know an S corp can not own another S corp, but this entity is actually a LLC

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Dominic Frandina
CPA
CASILLO & FRANDINA, LLP
Floral Park NY
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5.  RE: S Corp ownership

Posted 5 days ago
I think the question is whether this particular SMLLC can be an S corp shareholder.  Ordinarily  as long as the single member of the LLC is an individual it is OK.  But since the SMLLC is an S corporation for tax purposes does that disqualify it from being an S corp shareholder. I'm not sure, it seems like there might be a problem with this arrangement.

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Louis Zacarese
ShenkerZacarese & Marks LLP
Rockville Centre NY
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6.  RE: S Corp ownership

Posted 4 days ago
An S Corp may own a 100% subsidiary if it makes a QSSS election on From 8869.   Form CT-60 must also be filed with the NYS return.  The QSSS formation is treated as a 332 liquidation into the parent.  If the accountant failed to timely elect QSSS status you may have an inadvertant termination of S status.  Carefully look at the dates and you may qualify for relief under the special rules of Rev. Proc. 2013-30.

  I will be speaking about some interesting issues related to single member LLC's at The Tax Symposium on Friday.  See you there.

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Robert Barnett
CPA, ESQ.
Capell Barnett Matalon & Schoenfeld LLP
JERICHO NY
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