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    3 Replies Latest reply on Apr 17, 2009 9:06 AM by dublincpa

    2 LLC's & Sole Proprietorship

    smalls21 Newbie
      My fiance started his own IT business (www.larrysit.com) last year as a sole proprietorship. He started a local social networking site (www.delvalspot.com) that he has been operating under Larrysit.com, his sole proprietor company. Everything worked out fine this tax return, everything went through his personal taxes. During April 2009, he partnered up with a friend and they formed an LLC (www.beneaththemat.com), a wrestling network site. Now my finance and I were thinking of starting another LLC for real estate as myself and him as the partners in the LLC.

      My question is, does this seem like the correct thing to do, have 2 LLC's and a sole proprietorship, or should we go in a different direction?

      How will this affect taxes come the end of this year?- We would just have to file the 2 LLC separately, and the sole proprietorship, just as we did this year, with all profits/loss going through to his personal taxes?

      If anyone could offer advice that would be great!

      • Don't forget to sign up at www.beneaththemat.com * =)
        • Re: 2 LLC's & Sole Proprietorship
          EntreOrp Adventurer
          Hopefully a tax person can chime in on this.

          But as far as LLC's, they are passed through entities. Meaning the profit from the business is pass through to the owners of the company. So it will hit your personal tax return. (As you have already seen.)

          LLC's are really easy to setup as your husband can probably tell you. I'd recommend setting up an LLC as follows:

          One for larrysit.com
          One for the Real Estate Venture
          and continue to have the LLC for beneaththemat.com

          LLC's will offer you the most protection if an unfortunate event happens. If your husband sets up a network at a clients home and it causes a fire, your personal assets(house, car, anything you hold of value) can all be taken if you don't have the funds to cover the damage.

          Let us know if you still need clarification on anything.
            • Re: 2 LLC's & Sole Proprietorship
              smalls21 Newbie
              Thank you. So it is okay, to have 3 LLC's, so we would just fill out forms for three different LLC's at the end of the year and then the total of profit/loss is combined and added in on the 1040 form, correct?

              Is there a difference in the process to change Larrysit.com from a sole proprietor to an LCC rather than just starting up as an LLC?

               

              Thank you for your help, I really appreciate it.
                • Re: 2 LLC's & Sole Proprietorship
                  dublincpa Scout
                  I strongly recommend employing a capable attorney to make sure that EVERYTHING that you want to end up in the LLC does in fact get transferred. You have to be sure that every contract, registration, weblink etc. gets changed over in relatively short order. If it doesn't get done initially, it likely won't ever. You will (hopefully) be so busy with your successful enterprises that you won't likely remember to go back and take care of trailing items.

                  Separately, the LLCs that are partnerships will have their own separate tax returns, but will pay no separate tax at the Federal level and from what I can briefly glean will not pay at the state level if they are domiciled in Pennsylvania. All of the income will be taxed on your 1040s as you indicated. It is just shown a bit differently than the SMLLCs or Sole Prop. It will run through Scedule E page 2. This will apply to your partnership(s) with him as well as those with unrelated parties.

                  Good luck. Please let us know if you have any further questions.