Mark Kohler explains when to use LLCs as subsidiaries of your S-corp, covering liability separation, self-employment tax savings, and exit strategies. He walks through a real example: two S-corps owning an LLC to run a restaurant and avoid self-employment tax on that income.
Chapters
Well, I am honored. Tessa at Stamford. Boy, she sounds very smart. She probably is. She says, mark, you set up my S corp. Okay, thank you very much. One of our team members and law firm associates, I'm sure. So there's the Tessa S corp. Now let's see. What, what's Tessa doing? Oh, Tessa's doing consulting. She's doing hair and nails. She's. She's doing drywall. She's import exporting. She just started an accounting firm. Yeah, she could do all that. Those could be DBAs, they could be URLs, like a website. She could set up trademarks. Does she have to set up an LLC to have a subsidiary? Nope, she doesn't have to. She might need to or want to. For example, let's say she's going to partner with me. She's like, mark, let's start a restaurant in San Francisco. I'm like, alright, so we start a restaurant. Well, that's ordinary income. I don't want to pay self employment tax on it. I already have one S corp, so does Tess. So what are we going to set up? We're going to set up an LLC and my S corp is going to own part and her S corp is going to own part. Probably I'd own 60% and she'd own 40, but that, I'm just throwing that out test. So if you're interested, you let me know. But no, these LLCs are great for partnerships. Or she may say, I want to set up this as a subsidiary because I want to sell it. I have an exit strategy for that llc. Or it's got a lot of liability and I don't want to commingle it with the lie, the assets of the other. So you can do that too, Tess, but you do not have to have LLCs. Oh no, am I in trouble? It's Tesha. Kesha. Kesha. Kesha. That's not my fault. That was Darren's fault because he said, he said Tess. And I was like, What? It is Ke$, with a K as in colon.
