| What is the best tax structure for this company while providing maximum liability protection?========>>I guess it is hard to tell ; it depends on many variables. Shareholders are not typically held liable for C- S –copr or even LLCs.one thing, for tax purposes, either S-cropor LLC either SMLLC, or MMLLC, may be flexible as no tax at the entity level and Income passed through to the
Shareholders/partners for LLC and S corp. S corp and LLC are NIOT subject to double or even triple taxation UNLIKE C –corp.
My initial thoughts were that the owner should create two entities, A and B. A becomes the holding company LLC for all assets. Income (net of depreciation) is passed through to the owner's 1040 return. ======> You can own and operate multiple sub S corps. No problem.to cut your costs in running several s corps, your hold company needs to be llc;
Then it means A should be either S corp or MMLLC with two or more members or SMLLC (if there is only one owner that needs to file Sch C/SE on his income from A). A holding company is a company owing sub’s outstanding stock. The term usually refers to a company that does not produce goods or services itself; rather, its purpose is to own shares of sub companies to form a corporate group. Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different sub companies.
B (S corp) leases the equipment from A and acts as the operating entity that runs the business day to day. =====>>>>>>> Self-employment tax applies to sole proprietors,LLC and c corp but not to S-Corp officers, even if they are employed by the company. However, even if they own stock in the company, officers must pay normal employment tax for employment income, which includes Medicaid, Social Security, unemployment .insurance tax and any other income taxes, such as state income tax
The owner takes a salary draw from the S corp thus reducing SE taxes and takes the remainder as a distribution on his 1040.======>No I do not think so; the owner of the S corp CAN NOT take a salary draw to reduce SE taxes as S corp is not subject to SE taxes; however, the owner/EE of the S corp needs to pay himself on W2. And the corp itself can deduct 50% of the soc sec taxes matched for the owner/EE.so any profits passd thru to you instead of being paid out as wages to you results in SECA tax savings;however, those who pay seca taxes can actuallydedcut 50% of their seca taxes on 1040 line 27 too.
Entity B is who files all the 940/941 returns, business income returns, etc. and makes the quarterly tax payment installments to the IRS.==>>
This structure ensures the assets are shielded/protected and as is the operating company while providing maximum tax benefit to the owner.Do you see any issues with this? or potential violations of the law or regulations?====>>no not that I k now of;you use a parent-subsidiary structure. First, such a structure will minimize the number of tax returns and payroll returns you need to file. You can probable do a single corp tax return with the parent-subsidiary structure. You can probably also have one of entities process all your payroll.the sub will have its own bank account, separate assets and probably its own liabilities.also, the risks of the transportation company will probably be contained within the LLC/ s corp parent firm. Under the worst case scenario, your parent S corp/llc and the other sub s corp may be just ok due to limited liability.
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