Business Advisory Services
Everything you need to help you launch your new business entity from business entity selection to multiple-entity business structures.
Everything you need to help you launch your new business entity from business entity selection to multiple-entity business structures.
Designed for rental property owners where WCG CPAs & Advisors supports you as your real estate CPA.
Everything you need from tax return preparation for your small business to your rental to your corporation is here.
WCG’s primary objective is to help you to feel comfortable about engaging with us
Table Of Contents
By Jason Watson, CPA
Posted Saturday, September 7, 2024
The previous section was about holding companies versus management companies, but this particular LLC holding company variant does not have any commercial activity. What are we talking about here? Let’s say two people want to own an airplane. They could title it in their own names such as Buzz Aldrin and Amelia Earhart JTWROS. The fancy JTWROS is joint tenancy with rights of survivorship. This means that should Amelia die before Buzz, typically Buzz would absorb her interest in the airplane.
Time moves along, and Buzz and Amelia want to bring in Pete Mitchell as a third owner. They could add Maverick to the title because no one really knows who Pete Mitchell is, but this gets a bit cumbersome. If you add financing with personal loan guarantees to the mix, it could get messy if the bank wants to re-write the loan docs to add Pete… err… Maverick.
Rather, Buzz and Amelia would create a multi-member limited liability company (MMLLC) called The Little Red Bus LLC. This entity would hold title to the airplane but it would not have any commercial activity. The LLCs’s Operating Agreement would dictate how members could come and go, what happens if one member passes away, and other entity governance items. Therefore, when Pete Mitchell wants to be a part-owner, he would simply acquire member interest in the LLC. Title would not change since The Little Red Bus LLC owns the airplane, and Buzz, Amelia and Maverick own the LLC. Loan documents would not change, but perhaps an additional personal guarantee would be required.
LLCs are being used more and more in non-commercial or non-operating environments to make transfer of ownership super easy. We see this with boats, exotic car collections, art, among other things. Also, since there is no commercial activity, a tax return would not be required. Yes, an EIN would be necessary for a business banking account, but that in itself does not trigger a tax return filing requirement.
This KB article is an excerpt from our 420+ page book (some picture pages, but no scatch and sniff) which is available in paperback from Amazon, as an eBook for Kindle and as a PDF from ClickBank. We used to publish with iTunes and Nook, but keeping up with two different formats was brutal. You can cruise through these KB articles online, click on the fancy buttons below or visit our webpage which provides more information.
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Please use the form below to tell us a little about yourself, and what you have going on with your small business or 1099 contractor gig. WCG CPAs & Advisors are small business CPAs, tax professionals and consultants, and we look forward to talking to you!
The tax advisors and business consultants at WCG are not salespeople; we are not putting lipstick on a pig expecting you to love it. Our job remains being professionally detached, giving you information and letting you decide within our ethical guidelines and your risk profiles.
We see far too many crazy schemes and half-baked ideas from attorneys and wealth managers. In some cases, they are good ideas. In most cases, all the entities, layering and mixed ownership is only the illusion of precision. As Chris Rock says, just because you can drive your car with your feet doesn’t make it a good idea. In other words, let’s not automatically convert “you can” into “you must.” Yes, it is fun to brag about how complicated your world is at cocktail parties, but let’s not unnecessarily complicate it for the bragging rights.
We typically schedule a 20-minute complimentary quick chat with one of our Partners or Senior Tax Professionals to determine if we are a good fit for each other, and how an engagement with our team looks. Tax returns only? Business advisory? Tax prep, and more importantly tax strategy and planning?
Should we need to schedule an additional consultation, our fee is $250 for 40 minutes. Fun! If we decide to press forward with a Business Advisory or Tax Patrol Services engagement, we will credit the consultation fee towards those services.
Taxes are complicated. We make them simple. Get in touch with a pro here at WCG!
Everything you need to help you launch your new business entity from business entity selection to multiple-entity business structures.
Designed for rental property owners where WCG CPAs & Advisors supports you as your real estate CPA.
Everything you need from tax return preparation for your small business to your rental to your corporation is here.
WCG’s primary objective is to help you to feel comfortable about engaging with us