Personal Finance & Money Asked on February 20, 2021
I classified my single member LLC as an S-Corporation to take advantage of the tax advantages for qualifying small businesses as an independent software contractor. This worked well while generating revenue; however, I ceased working under the LLC and am no longer generating income through the entity.
I’d like to preserve my LLC’s name and brand, and be able to use it should I resume contracting work in the future; however, I am confused about my options going forward, especially since the business still has associated expenses for annual filings with the state and with keeping web domains.
So far research suggests:
Option #3 would be ideal; however, from what I can tell, I must report all expenses on 1120-S, this would show as a loss and leave my business subject to being reclassified as a hobby. Option #2 is likely feasible, but truly I’d like to just pay a few dollars per year to keep the LLC inactive. For either option, I am aware I must continue to file Form 941 quarterly showing no wages paid, and filing 1120-S annually.
I found an article on businesses taking a hiatus. To quote the article, "you must be able to present a set of facts indicating that you're sincerely looking for business."
If you are not interested in doing that, your option #3 should work: Filing an S-corp tax return as required without deducting business expenses.
Answered by Orange Coast- reinstate Monica on February 20, 2021
I recommend dissolving your company and creating a new one in the future if you need it.
You don't need to worry about 26 U.S. Code § 1362 (g). That applies to the same corporation and it doesn't apply to a brand new corporation. Also, I'm pretty sure that law doesn't apply to LLCs. An LLC is a company but is not a corporation (despite the fact that it can confusingly be taxed as an S-corporation).
You also have concerns about preserving your "LLC's name and brand", but what is really needed to do that? How likely is it that someone else will start a business in your state with the same name? Also, for many types of businesses, owning the right domain name protects you a lot.
Answered by gaefan on February 20, 2021
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