Single Member LLC owned by an S corp

We were recently told by our accountants that we could contribute our single member llc to a newly formed s corp. They told us that my husband would still remain the single member. That does not make sense to me b/c he contributed the LLC to the S corp for 100% ownership in the s corp.

Wouldn’t the new member be the S corp?

And can we pay my husband wages through the LLC? (now that it’s owned by the s corp, can issue his wages through the LLC instead of the s corp)

I believe that the llc will will flow through all of it’s income/expenses onto the s corp return. correct?

Answer

It’s a little unclear what your accountant is suggesting.

Is the SMLLC to become a shareholder in the s-corporation?

Or did you mean to say “convert” your SMLLC to an s-corporation taxation?

The general rule is that only natural persons can be shareholders of s-corps (no LLCs or corporations).

Perhaps there is a new letter ruling that makes an exception for SMLLCs, and this is what the accountant is referring to.

Does the SMLLC have significant assets which would cause tax issues by changing form to another type of entity?

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