Multimember LLC is sole member of another LLC

[JamesInGA]

ABC LLC is a multi-member LLC.  It is the "sole" member of DEF LLC but I understand that DEF LLC is still a multi-member LLC to the IRS. Where I'm at a loss is the funding of DEF LLC. ABC LLC wrote a check for $10k to fund the start of DEF LLC. My two questions are

1. In Turbo Tax, I'm creating the new DEF LLC and it's asking for member contributions. Am I splitting it between the 2 members of ABC LLC or do I put somewhere that the $10k came from ABC LLC?

2. What is that $10k in relation to the taxes for ABC LLC? Is it a business expense? A distribution to the members and then the members contribution to start DEF LLC (perhaps answering question 1)?

Thank you

[Rick19744 · Accepted solution]

A few comments regarding your issue:

• DEF LLC is not a multi-member LLC as you noted.  It is a single-member LLC of ABC LLC; a disregarded entity for tax purposes.
• As such, DEF LLC does not file it's own tax return.  It is treated as if it was a division of ABC LLC.
• As a result, there will only be one tax return and all activity of DEF LLC is reported on the return for ABC LLC.

[JamesInGA]

So DEF LLC doesn't have to file anything?  All of it's income, expenses, etc are just lumped in with ABC LLC's with no distinction?

[Rick19744]

That is correct since it is a disregarded entity for federal income tax purposes.

However, there may be some required state reporting with the Secretary of State so definitely check that out.