Coordinating Cash Flowing Through Entities
I purchased a house Subject To, putting the house in a land trust and making my LLC the beneficiary of the trust. The seller wrote a check (she owed more than I could pay for the house) to my LLC. My C Corp. is the property management company, which will be collecting the rents and paying the mortgage. The question is, how do I flow the money received by the LLC into the C Corp.? (I've heard that I want a minimum amount of money in the LLC, for tax purposes). I'd love to hear from anyone who's got a similar set up and can share their experience.
Thanks!
You can flow $ in by writing a check from one co. to the other. Keep in mind that if this is"profit", you'll have to pay taxes on that profit in the C Corp setup, then if you take money out to "pay" yourself, you'll pay taxes on that $$ again. That's why people use an S Corp setup. No double taxation. S Corp and LLC are more alike in tax setup than S Corp and C corp in that LLC and S Corp there is no double taxation. If you pay yourself, that's it. The co. itself doesn't pay taxes on the "income", it just flows over to your personal W2.
Best of luck.
Sam
We have a C corp as the management company for our LLCs. All tenents checks go into the C corp and then funneled to the LLCs. The c corp can have the benifits and advertising expenses and the LLCs just have profit. Insurance and the cars are leased from the C corp. We figure roughly what the cost for the year are and try to get that amount in the c corp. Therefore no extra tax paid and we get all benifits of the C corp.
Sire
Quote:
On 2004-05-28 09:25, sire wrote:
We have a C corp as the management company for our LLCs. All tenents checks go into the C corp and then funneled to the LLCs. The c corp can have the benifits and advertising expenses and the LLCs just have profit. Insurance and the cars are leased from the C corp. We figure roughly what the cost for the year are and try to get that amount in the c corp. Therefore no extra tax paid and we get all benifits of the C corp.
Sire
Sire,
What is the benefit of funneling the funds in through the C Corp when you can write off the cars and expenses in the exact same way through an S Corp?
Perhaps I am a little thick, but I can’t see the benefit for the extra work required. Can you expand on this?
Thanks
watch out for money laundering laws and "piercing the corporate vail" w/ complicated flows.
Quote:
On 2004-05-27 13:48, samedwin wrote:
You can flow $ in by writing a check from one co. to the other. Keep in mind that if this is"profit", you'll have to pay taxes on that profit in the C Corp setup, then if you take money out to "pay" yourself, you'll pay taxes on that $$ again. That's why people use an S Corp setup. No double taxation.
Writing a check from one business entity to another is not "profit", it's income. A paycheck written from a C-corp to an employee is an expense. Shareholders who work in the corp. are its employees, even if it's only a 1 person corp (owner/operator/shareholder). A shareholder who is active in the business is not self-employed in the eyes of the tax law.
In the real world, small C corporations can easily avoid income taxes. All or almost all of a small C corps earnings typically are paid out to is employees as wages and fringe benifits (which are not taxed to the corp. as profits, since they are deductible business expenses). Unless non-working shareholders want there to be corporate income (think dividend) it is easy to avoid double taxation.
Hope this helps...
Unfortunately, in the "real world" it’s not always that easy for a small C-Corp to avoid taxes. One common example would be -- it’s the end of your fiscal year, you have money on the books that’s technically showing as profit, but really needs to stay in the corporation for upcoming expenses in the following fiscal year. Yes, you can do all kinds of things trying to move the money and expenses around, but the point is -- it’s not as simple as some would think. And an IRS audit on a C-Corp is not a fun endeavor. And no matter how clean you run your company, eventually you WILL be audited. Just my 2 cents.
Sorry, I wasn't clear enough. It's easy for corps to avoid DOUBLE taxation. Money on the books at the end of the FY, retained earnings, is taxable. But even this can be of advantage to you as the 1st $50k is only taxed at %15. There is no such thing as double taxation if you never pay dividends. Paying dividends is very easily avoidable in a small corp when the owners run it as well. As far as handling an audit goes, that's what you have a pro CPA for. And the likelyhood of your corp being audited is slim compared to non-corporate business entities. The best thing to do is go talk with your CPA, just be sure he's a sharp and up-to-date one. :-D
Quote:
On 2004-05-28 09:25, sire wrote:
We have a C corp as the management company for our LLCs. All tenents checks go into the C corp and then funneled to the LLCs. The c corp can have the benifits and advertising expenses and the LLCs just have profit. Insurance and the cars are leased from the C corp. We figure roughly what the cost for the year are and try to get that amount in the c corp. Therefore no extra tax paid and we get all benifits of the C corp.
Sire
How do you funnel the money from the C Corp to the LLC? I could see the LLC paying the C Corp a fee for acting as property manager, but how do you justify the C Corp paying the LLC? I don't mean to sound argumentative--but this is the part where I get confused.
Thanks!
corp to llc flow
Refund of prop mgnt fees?
Other costs/expense?
This have to have some ring of truth
bty, if you would PM me on this point.
How can the C-corp make the payment on the mortgage in the trust?
Sounds like you just co-mingeled funds.
Use your C as the property manager and take a portion of all monthly to the C and the rest goes to the LLC. C can pay all medical. I believe this is changing for the S corp soon. Doule tax?? get the money out of the corp. Buy a new computer or go on the "Note Boat" educational trip on note buying. Don't worry with the double taxation? Use the money instead. A few months back we go a new accountant/tax atturney and he showed us how much money we were letting go and not puting to our benifit.
The C corp has many benifits that out wheigh the worry of double tax. Board meetings (don't quote me) #280a easy way to get cash from a C corp. You get audited pay your dues and head on to more money. Do you think the guy making 32K working for the IRS knows these laws. The tax laws are writen to be weathy. I am no accountant but a good accountant will make you thousands. You interview them like you do an employee. Ask "what if " questions of your accountant, you may get some good answers.
Best to you
Sire[ Edited by sire on Date 06/04/2004 ]
You're right Sire. A good accountant/tax guy is the way to go. "Inc. and Grow Rich" is a wonderful reference book that my CPA had me read. It really helps you see how you can live out of your C corp and then pay taxes only on what's left. That's why we have the C Corp.
This is all a little too complicated for the benefits that are being described.
You want to maximize your wealth and minimize your legal liability (assuming you have not done something wrong). In some cases you can end up costing yourself more in lost time, fees paid, lending complications and mistakes made with too complex of a structure.
BTW - Make sure you have umbrella insurance. It is inexpensive and not complex.
John
[addsig]