Parent - Subsidiary profits...

[Andrew McCarrick]

I'm looking at setting up a company and a subsidiary to that company. The things I'm not sure about is, does the income from the subsidiary flow through to the parent company and taxed there? Or is the money independent of the parent company (meaning, the sub. just functions by itself.)?

 

[Andrew McCarrick]

I'm guessing nobody on here has a subsidary?

 

[GlennChan]

Some companies will use subsidiaries (or entities that are pretty much subsidiaries, though they may be something else) to create phantom profits. Shady. And it still goes on even after Enron... e.g. ALD.

The right way to do things (in ALD's case anyways) would have been to treat transactions as intercompany transactions, and consolidate the accounting. (Obviously, don't do shady accounting. These people should end up in jail.)

I'm not an accountant, lawyer, nor do I own a subsidiary so don't take what I say too seriously. I apologize for not being helpful.

 

[donatello b]

guessing - it depends on how you set them up ..
if you set up 2 LLC's seems they would be separate ..
if you set up 3 LLC's - one LLC for each company = 2 LLC and then a 3rd LLC that has the 2 LLC under it then all $$ flow thru the one LLC ..
from what i recall a LLC has the choice to either be taxed like a Corp or the $$ can pass thru to the owners ( members of LLC, members decide how $$ are to be divided ) ..each tax year you have the option to change ( corp or pass thru) - whatever works out best for LLC/members ....

 

[Yannick Hagman]

Shouldn't be the case. But I dunno about America.

But you can bill you subsidiary for administration costs or whatever from your holding if it has to be...

 

[Andrew McCarrick]

Okay, thanks. I'm looking at starting a record company and then buying an indie label and making the indie label a subsidary to mine. Which then would be backed financially by the parent (my) company. Was just hoping the subsidary profits would flow through, so I could then take in the money and feed it plus some other funds back to the sub. in one process.