LLC setup, good standing, but no Activity

[RippleEffect]

I created an LLC last year with the intent of doing a quit-claim deed to transfer my property (I live in colorado, but the property is in Alabama) into the LLC.  From there, I was going to have the rental checks made out to the LLC, and I would also make the Mortgage payments from the LLC bank account.  While I know this doesn't reduce all my risk, it was a start to getting my feet wet.  I'm still not sure a quit-claim deed would trigger the due on sale clause..  I don't think so with quit-claims, but open to comments.

As it turned out, I decided to get $1M of umbrella insurance to cover any risks, and never moved the property into the LLC.   It's been a great rental, etc, etc.  So now, I have an LLC that is essentially a "shell" with nothing going on in it...  I have renewed the registered agent and believe the LLC is still an existing entity, but my question is do I have to file a tax return for that LLC?  It's a single-member LLC, as a disregarded entity.  Maybe I just answered my own question there..  Perhaps, I do not need to worry about doing a seperate tax return for this LLC that is doing nothing?  If it was doing something (like earning income), then I am guessing that income would be treated on my personal tax return as if I were a sole proprietor. 

[BLL]

Transferring title to an LLC triggers the DOS clause. How can it not? The LLC is a distinct legal entity from you.

SMLLC has no tax return. Rental income/expenses are reported on Schedule E. I would just file the cancellation papers with the state. You aren't using it and it won't provide any real protection. You are just wasting your money on the state filing and registered agent fees.

[mcwagner]

if the entity has a tax id number, you need to file a return even if it's all zeroes.  as a disregarded entity, a single-member llc will be just a Sch C on your personal return, with the entity's tax id number, and zero.  if you have a multi-member llc, you need to file a 1120.  the IRS will be looking for the tax id number and may...or may not...ever come asking about it.  just easier to file the darn thing and it's covered.

you'll probably also need to file a state return of some sort.  most all states have them although some are more complicated than others.  many are just informational.  some states have a minimum tax or filing fee.

although technically the transfer violates DOSC, I've never seen it cause a problem.  advise them in a letter of your intent (thus no intent to defraud the bank).  as long as they're getting payments, there is probably nothing to cause them heartburn. 

[Dave T]

if you have a multi-member llc, you need to file a 1120.  the IRS will be looking for the tax id number and may...or may not...ever come asking about it.  just easier to file the darn thing and it's covered.

Mark was in a hurry when he wrote this.  What he really meant to say is

if you have a multi-member LLC, you need to file a 1065 unless your LLC has elected corporate tax treatment in which case you need to file the appropriate 1120

[mcwagner]

oh.  yeah.  what he said.

thanks, Dave.

[techhead]

I'm curious along the same line of question from the original post...

What about an LLC, set up in 2007, that has incurred expenses but no realized income?
Can any expenses be deducted for 2007? Are they carried forward to 2008 where there will be income?

[BLL]

Assuming a partnership, the LLC expenses will pass to your personal return.

[techhead]

Assuming a partnership, the LLC expenses will pass to your personal return.

Yes, I understand that but are the expenses still deductible if there is no LLC income for the tax year?

[BLL]

I'll defer to Mark, but why wouldn't they be? They are deductible as long as they are legitimate and you are making an honest attempt to generate revenue. I can think of some situations, like expenses for rental property that is not yet in service, where expenses are not deductible.

[mcwagner]

yes, letigimate business expenses are always deductible.  however, if you don't show a profit for a few years, you may have to justify that you are, in fact and circumstance, really in business.

[pauly99]

Now if a property was purchased in an individuals name but
they own an LLC, could you not file the return as the property
was purchased in the LLC, rather than in the individuals name?
I'm just thinking out loud here and without my morning cup of
coffee.

[mcwagner]

You can file the return any way you want.

I won't prepare a return with the LLC as owner unless the LLC, in fact, actually owns the property.

what's the point anyway?  same stuff is deductible either way.