Hi,

An attorney recommended that a client of mine, for legal purposes, create a second company, company B to separate payroll from his original company, company A. Company A does the work, collects the income and pays all the expenses accept for payroll. So during 2023, company B would invoice company A for payroll. Company B's P&L is a wash. Income equals expenses. The problem is, company A was paying the employee's medical insurance and simple IRA contributions in the amount of around 100K. Company A is showing a 100K loss in 2023 due to the insurance and simple expenses. I'm trying to decide what to do with those expenses. As of now, I'm thinking of reporting the 100K in expenses under company A, since company A paid them, and reporting the 100K loss. The owner does not have enough basis to deduct the 100K so some of it will roll into future years. The hesitation is that these expenses should have been paid out of company B. 

Would anyone here object to that?

Thanks