Posted by JHyre in Ohio on February 10, 2002 at 08:16:45:
The election makes you a C-corp for all federal tax purposes and for most state tax purposes as well, so no pass through. Once you elect C-corp status, number of members is irrelevant for federal purposes. A C-corp (or any other entity) does not necessarily make dealer issues go away…it merely helps keep the taint confined to the properties in that entity. See my dealer article for more on that topic.
John Hyre
effect of corporate election of LLC ? - Posted by mike
Posted by mike on February 08, 2002 at 06:36:24:
John, in order to avoid being classified as a dealer, the common recomendation is to incorporate, but what would be the effect of forming an LLC and electing to be taxed as a corp? Would this achieve the same thing? I ask because here in Texas the filing fee for LLC’s is less and LLC’s have to pay the same taxes as corporations (franchise tax). Would this election change the pass through quality of the LLC? If so, it seems to me that I could avoid dealer status for my rehabs by electing corp. taxation for an LLC and have a much easier record keeping task by eliminating most of the corporate formalities. Also ,if this would work, would the LLC have to have more than one member in order to not be disregarded by the IRS? I am setting up a meeting with a local accountant, but thought this question would be of general interest. Thanks.