On May 28, 8:32 am, Rich Bowen <[email protected]> wrote: > On May 27, 2009, at 17:22, Blake Johnson wrote: > > > Every member of the Habari LLC will have to receive a Schedule K-1 and > > report Habari income and expenses on their personal tax returns. This > > is a non-trivial addition to tax prep that I would not wish upon > > anyone, let alone a large group of people. For this reason, I am in > > favor of limiting the LLC membership to a small subset of people > > (perhaps the founding four?). > > Um ... seriously? > > My taxes are way too complicated already. Why would I have to receive > any kind of schedule anything, if I don't receive any actual > compensation from the corporation? > > What baffles me about all this stuff is that the ASF has 200+ members, > and *none* of them have any such requirements. What's the difference? > Is it because it's a 501? > > Isn't there something less complicated? >
As Rick said, an LLC is like a sole proprietorship or a partnership, where gains and losses are reported on the owners' individual tax returns. You distribute Schedule K-1s to the owners to declare what portion of gains/losses they are responsible for. I looked into how the ASF is organized. It is a member corporation (aka a non-stock corporation) which operates as a non-taxable non- profit under 501(c)(3). Since a non-stock corporation has members rather than shareholders, the members cannot receive distributions or dividends, thus they do not need to report anything on their individual tax returns. On the other hand, the corporation does need to make annual filings to the IRS to continue to receive 501(c)(3) status. If the corporation generates revenue in excess of $25,000, it also needs to file its own tax return. Looking at this now, it seems to me that the annual paperwork associated with an LLC would not be that different from the paperwork for a 501(c)(3). In both cases you need to file forms with the IRS breaking down the revenue, expenses, and assets of the LLC/corp. Given this, might it make more sense to form a membership corporation? --Blake --~--~---------~--~----~------------~-------~--~----~ To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/habari-users -~----------~----~----~----~------~----~------~--~---
