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Recently established LLC in Texas to house ORRIs
Posted on 1/24/12 at 9:33 pm
Posted on 1/24/12 at 9:33 pm
I recently set up an LLC in Texas to house oil and gas overriding royalty interests deriving from both onshore and offshore wells.
Since the LLC was created with two members, it's considered a multi-member, LLC and must initially be classified as a partnership. It appears that I can file form 8832 if I'd like to elect corporate status.
From a tax standpoint, should I just keep it as a partnership? The only income I'll be receiving is from oil and gas royalties. I'm not really going to "work" for this money as I don't plan on providing any type of service. Any feedback would be greatly appreciated.
Since the LLC was created with two members, it's considered a multi-member, LLC and must initially be classified as a partnership. It appears that I can file form 8832 if I'd like to elect corporate status.
From a tax standpoint, should I just keep it as a partnership? The only income I'll be receiving is from oil and gas royalties. I'm not really going to "work" for this money as I don't plan on providing any type of service. Any feedback would be greatly appreciated.
This post was edited on 1/24/12 at 9:43 pm
3
Posted on 1/24/12 at 9:41 pm to Stromile Swift
quote:
Since the LLC was created with two members, it's considered a multi-member, LLC and must initially be classified as a partnership
Where does this come from? I'm not saying you are wrong, but my problem is -- if I wanted a partnership I would fricking formalize a partnership agreement. If I want an LLC, I'll organize an LLC. If I want a corp I'll incorporate. Do you mean it will be treated like a partnership for tax purposes or do they actually legally classify it as a partnership?
This post was edited on 1/24/12 at 9:41 pm
Posted on 1/24/12 at 9:52 pm to rmc
I meant that it will be treated like a partnership for tax purposes. My accountant said we'd be fine sticking with partnership route but I always like to research my options.
This post was edited on 1/24/12 at 9:56 pm
Posted on 1/24/12 at 10:15 pm to Stromile Swift
No reason to change it.
Posted on 1/25/12 at 10:17 am to Stromile Swift
Partnership all the way. More tax advantages than S-Corps and C-Corps.
Posted on 1/25/12 at 10:59 am to Stromile Swift
I think it really depends on the size of the royalty here. You could always do a FLP and have a corporation in Texas run it.
Posted on 1/25/12 at 5:00 pm to Stromile Swift
Your accountant gave you good advice. Stick with partnership status for tax purposes. It provides for more flexibility in operations and distributions than corporate status. It also avoids some issues related to the contribution of appreciated propertry to the LLC that may apply in your case.
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