Accounting & Bookkeeping & Small Business Forum

[jmac1]

I'm hoping someone can point me in the right direction where to research this. Assume a C-Corp that is wholly owned by a 3 member LLC. All of the employee salaries are paid by C-Corp. After all expenses, suppose there is $500k in profit to the C-Corp. To avoid double taxation, can the C-Corp expense out the profits to the LLC as a "Consulting Expense" and the LLC then record the revenue as "Consulting Income". Where is there guideance on this that I can turn to as the IRS may deem this to be possible abuse??? Better yet, could you expense all of it out except the first $75k (which is taxed at 15% at the corp level). This is grey area so if anyone can shed some light on this or where to turn for some direction, I would appreciate it. Thanks - JMac

[Richard Noot]

How is it you figure that this would save taxes???

[jmac1]

The $500k would be taxed at 35% at the Corp level. Anything remaining if distributed to the LLC would then be taxed again at 15% dividend rate.

If you "drain" the profits, the C-Corp would not pay any taxes. The $500k revenue received at the LLC would be taxed at the members' individual rates which would be 33% max, not to mention avoiding paying dividend tax at 15%.

[Richard Noot]

jmac1 wrote: The $500k would be taxed at 35% at the Corp level. Anything remaining if distributed to the LLC would then be taxed again at 15% dividend rate.

If you "drain" the profits, the C-Corp would not pay any taxes. The $500k revenue received at the LLC would be taxed at the members' individual rates which would be 33% max, not to mention avoiding paying dividend tax at 15%.

What about SECA?? Or have you found a creative way to avoid paying that??

[jmac1]

I'm not trying to avoid. I'm trying to legally minimize a huge tax bill. forget about it.