I have my clients charging an upcharge to the management company for services provided. They document all the management functions that are providing for the Company. I wonder if that would fly?
I think most management company arrangements in closely held businesses do not fail economic substance - the Aspro case is a good example. In the situation listed above, there is still no reason for the entity to exist. I would not recommend this structure.
In my opinion, no. There is no SE tax; there are employment taxes. It still may make sense for high-rate taxpayers, but this issue is a factor in determining the choice of entity for tax purposes.
What is a legitimate way to operate the FMC?
In this scenario? I do not think there is one. It is solely tax-motivated and has no other bona fide business purposes for existing.
I have my clients charging an upcharge to the management company for services provided. They document all the management functions that are providing for the Company. I wonder if that would fly?
I think most management company arrangements in closely held businesses do not fail economic substance - the Aspro case is a good example. In the situation listed above, there is still no reason for the entity to exist. I would not recommend this structure.
So, if they have an S-Corp, they can't pay their kids and avoid SE tax?
In my opinion, no. There is no SE tax; there are employment taxes. It still may make sense for high-rate taxpayers, but this issue is a factor in determining the choice of entity for tax purposes.
Thank you