Taxing a LLC

[Attie]

 My  Client and his wife just had a attorney sign them up for a LLC. Also named in this LLC is a brother and all income and expenses are spilt 50/50. The attorney told them that they did not have to file any different tax return than they always have. (1040). I thought that because they have a third party on this LLC they have to file a partnership return. Can't seem to find anything that says different. Attorney says they don't know anything about taxes. Can anyone clarify?

[qbteachmt]

You should already know this, as a tax professional. No offense, but it's scary to read a basic question like this. Do you use IRS resources? Google:

irs llc filing

And read the IRS results in that list.

And how do three people split 50/50, anyway? Also, be aware of bad reasons to form an LLC. Perhaps that is bad guidance from that lawyer. It happens all the time. Why do they want an LLC? What has the brother got to do with this? What is the intended operation?

[RTS1823]

Sounds like a partnership to me, but you need more information with how the brother got involved. Attorney is correct when he says he doesn't know anything about taxes.

[IRonMaN]

I'm putting my money on the fact that he probably doesn't know a lot about law either --------- just a feeling that came over me.

[dkh]

Ask for the documentation for setting up this LLC. 

 Did this attorney apply for an EIN ?

[sjrcpa]

 What business, if any, does this LLC do?

[Skylane]

If you have the attorney remove the brother from the LLC then you can consider both the LLC and the attorney as disregarded entities.

[sjrcpa]

The LLC could be disregarded only in a community property state or if owned by the married couple as tenants by the entirety.

OP never said if there is an actual business here.

[Attie]

They have a rental for years that they just cut all income and expenses in half. Then they got a lease on some land and had a LLC formed. I know that a married couple in Wis can be regarded as a sole proprietorship. Was just wondering if there had been any changes in the law as to having more than husband and wife. I couldn't find anything that says that they don't have to file a partnership return when there is more than two married people. Just asking if there is anything that I missed since i don't do partnership returns anymore and want to make sure before I send them on to someone else.

Thank you for taking the time to answer my question.

[IRonMaN]

Send them off to greener pastures- they have a partnership

[taxes96786]

LLC attorneys are not tax professionals...have client ask attorney to provide the document that supports his information.

[qbteachmt]

"They have a rental for years"

They, who? Is that now being titled to the LLC?

This is why they need a new attorney.

"Then they got a lease on some land"

Who owns that land? Here we go again, with the pesky legal ownership details, which matter.

"and had a LLC formed."

But an entity such as that LLC cannot make money or incur costs on something it doesn't own, unless it is leasing or renting from the owner, and then subletting. This can get very ugly very quickly.

"I know that a married couple in Wis can be regarded as a sole proprietorship."

But you have a multi-member entity, now. If they are going through with all the necessary changes, of course.

"Was just wondering if there had been any changes in the law as to having more than husband and wife."

Did you look at the google results I mentioned?

[sjrcpa]

Is anything actually in the LLC?

If no, they may be able to ignore it and continue on as they have been.