What Tax Election Status is Best for My LLC?

I have a single member LLC. All income from it will be passive income such as interest, dividends, capital gain or rental income, none of which is subject to self employment (SE) tax. Obviously the LLC will have expenses too. If I use the default tax status, its treated as sole proprietor and income is reported on Schedule C.

1. Is this income then subject to SE Tax because its on Schedule C or is it reported elsewhere? If elsewhere, is that income still offset by the expenses?

2. If it does trigger SE Tax, would a status election of S-Corp solve this problem if it is subject to SE tax and what other issues would that raise?

Don't make any elections. For tax purposes, it will be as if the LLC doesn't exist and that you are receiving all the income and paying the expenses directly. You will, however, still have whatever legal protections the LLC affords you under state law.

With all of that passive income, you should be careful of not getting deemed a PSC, paying the highest tax bracket rates.

For flowing through to the individual return, some items keep there form regardless of entity status. Interest and dividends go to schedule B, rental income should go to schedule E, etc. There are many advantages and disadvantages to each...
You might want to consult with a tax professional.

Tags

　　Seed Capital 　　Return Investment 　　Real Money 　　Real Estate Investment 　　Raise Capital 　　Property Investment 　　Profitable Investments 　　Private Investment

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