Background: Currenlty I am trading Foreing Exchange via an LLC taxed as a partnership that only has portfolio income that is being taxed via the 60/40 split. I have 5 members of the LLC, myself, my wife, my two children, and my sister. With me as the major owner. What I would like to do: I was thinking about forming a C Corp, and having some of the income pass to it from the LLC. The C Corp would be the managing member. Then I was wanting the C Corp to provide member of my family with fringe benifites. Does anybody know how to do this? Is there any great book that tell you how?
Try a CPA. Also, be aware that if you've created this tax strategy on your own and dont have legal opinions on it, in an audit, the IRS can disallow it and treat you like you're an employee, forcing fines, penalties etc on you. Happens to small law firms who try and get cute.
Sure you may certainly forma c-corp that allows all the juicy tax deductions, such as a full medical expense reimbursement plan. And as long as this is a bona-fide trade or business and you treat it correctly, it should stand up to IRS examination. But I wonder - how is this arrangement to be a bona-fide trade or business rather than a PHC (Personal Holding Company) subject to punitive taxes? How is the c-corp going to obtain it's valuable ownership percentage from within the existing LLC?
The C Corp would simply provide management/trading oversight for the LLC. For all it's hard work, it would get a slice of the profit pie of fhe LLC. Say 10 to 20 percent of the profit. This would allow it to pay for it's employees benefits.
Understood, and again - how do you expect to ensure yourself that this will not be a personal holding company? I'm not saying a c-corp can not be used if done properly. I'm just questioning the scenario as you've laid it out above.
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Something to avoid owning???? A personal holding company is a company that has the majority of their income coming from investments, and not earned income. These companies were set up in the past by those who were trying to shed some of their personal tax liability. The Congress decided to prevent this by calling those companies PHC, and slapping them with at 35% flat tax on all their income. Thus for the most part, many PHC went out of business. And then came the LLC....