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#1138596 - 03/02/09 09:23 PM CTR on an LLC
Georgie Girl Offline
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I am trying to clarify the correct way to handle CTRs for LLCs. Example: ABC Inc owns XYZ LLC. XYZ LLC uses the same TIN as ABC Inc (becuase they are a single member LLC/disregarded entity with no employees).

Question #1: Should transactions that are for the benefit of XYZ LLC be aggregated with transactions that benefit ABC Inc, since ultimately ABC Inc benefits (as the owner) of XYZ LLC?

Question #2: If I need to file a CTR only for transactions benefitting or involving XYZ LLC, should I list only XYZ LLC in Section A or should I list both ABC Inc and XYZ LLC?

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#1138652 - 03/03/09 12:08 AM Re: CTR on an LLC Georgie Girl
Titanic Offline
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Are both entities sharing the account(s) involved?
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#1138684 - 03/03/09 11:00 AM Re: CTR on an LLC Georgie Girl
Elwood P. Dowd Offline
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Without regard to the fact that the LLC is transparent for income tax purposes, it is not the same legal entity as its member. As a rule, their transactions are not subject to aggregation.

If Annie was the sole member of an LLC you would not aggregate her transactions with those of the LLC. The same rationale is true if Annie Inc. is the sole member; it is still a different person than the LLC.

As Titanic's question suggests, if the entities are being operated as a single entity, comingling funds etc. then their transactions are subject to aggregation. That reflects the exception to the rule, not the rule.
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#1138916 - 03/03/09 04:19 PM Re: CTR on an LLC Georgie Girl
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The two entities are not sharing accounts.

Thank you for the information Ken. This is very helpful.

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#1264548 - 10/09/09 03:42 PM Re: CTR on an LLC Georgie Girl
nemsi Offline
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OK i would like to piggy-back this post as it's similar and proves that i did try to find my answer before posting! I have a customer who was a sole proprietor(C-store)and has since formed a single member LLC- using SSN. The sole proprietorship was phase II exempt. I'm thinking that the cleanest way to do this is revoke the exemption (by filing 5 CTRs) on the LLC and then file a new DOEP. Does that make sense? For the CTRs filed, should section A of the CTR be completed with the individual's name on line 2 & 3 and the LLC shown on line 5-the same way we would have completed the sole proprietorship CTR?

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#1264873 - 10/09/09 07:20 PM Re: CTR on an LLC nemsi
John Burnett Offline
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While your suggestion for CTR completion is technically incorrect -- the LLC is the person on whose behalf the transactions were completed, not the individual -- using the individual's name and recording the name of the LLC as if it were a sole proprietorship will be practical because it avoids the inevitable "mismatched TIN" report from the IRS. Single member LLCs have been around for a number of years now, and it's time for FinCEN to do something to clear up this question for those that elect to be disregarded as entities.

As for the plan for the exemption, I agree. Get the five reportable transactions out of the way and then you can file the DOEP.
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#1264882 - 10/09/09 07:32 PM Re: CTR on an LLC nemsi
Elwood P. Dowd Offline
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You do get credit for trying. Here's another thread where only John had the courage to respond.

The problem is that there are two "persons," the individual and the LLC. Both have the same SSN. Nevertheless, it's the LLC that is the person on whose behalf the transaction is being conducted, not the individual. So, it's the LLC that goes in Section A. (Listing the individual in a second Section A is nonsense and will not cure the problem that follows.)

If the SSN belongs to Morton Brown and it's "Morton Brown LLC" or "Brown LLC" the matching system will find "BROW" and match it to the SSN. However, if the first four letters of the owner's surname do not appear in sequence the name of the LLC, it will be kicked back to you as a mismatch you cannot repair.

FinCEN is aware of the issue.

P.S. Please note that I'm avoiding the opportunity to suggest they issue some guidance unless there is an armored car involved. wink

PSS, I agree with the plan (5 filings & 2 months) too. The LLC is a new customer.
Last edited by Ken_Pegasus; 10/09/09 07:45 PM. Reason: John's post was not there when I was writing mine
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#1264891 - 10/09/09 07:41 PM Re: CTR on an LLC Elwood P. Dowd
John Burnett Offline
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Ken is, of course, correct, or at least more correct than I. The person listed in Section A is the person on whose behalf the transactions were completed (in this case, the LLC). You cannot be faulted for filing correctly, and this is the more correct way to go.

Don't forget to insert information about the individual completing the transactions in Section B. You can't use the "conducted on own behalf" excuse box.

Just annotate those pesky IRS notices about mismatched TINs with the appropriate shrug and move on.
Last edited by John Burnett; 10/09/09 07:44 PM.
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#1264915 - 10/09/09 07:54 PM Re: CTR on an LLC John Burnett
nemsi Offline
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Thanks guys!!! My frustration was coming from the belief that i would get the dreaded error notice when I use the SSN for the entity. I do know that the LLC goes in section A and the single member's info goes in section B but i was just trying a figure out a way to avoid error notices on all 5 of the CTRs filed! I was encouraged to learn that i may not get an error notice since the individual's surname is in fact the first name used in the LLC.
Thanks again and have a great weekend.

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#1267872 - 10/16/09 02:26 PM Re: CTR on an LLC nemsi
Kathleen O. Blanchard Offline

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Question here on a single member LLC. What about when the single member LLC has a CD and the IRS rejects the SSN number combined with the company name on interest reporting, and fines the bank? Thoughts?
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#1267880 - 10/16/09 02:32 PM Re: CTR on an LLC Kathleen O. Blanchard
John Burnett Offline
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The bank should be able to wriggle out of that, Kate, if it can document that the LLC elected to be disregarded as an entity, in which case the SSN of the single member is considered by the IRS to be the proper TIN for the LLC. I like this approach because it figuratively shoves the IRS's face into its own rules to escape the penalty.

For the future, however, the institution ought to set up its IRS reporting name field (if it's available) to be the name of the individual. In some systems, that may mean re-styling the account:

John Doe, Single Member
XYZ LLC
Address

The bank can also cover itself by having in file a W-9 for the LLC.
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#1267888 - 10/16/09 02:37 PM Re: CTR on an LLC John Burnett
BrendaC Offline
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Some systems, such as JHA Silverlake, have the ability to override the primary account owner with another CIF ID for IRS reporting. If you have that option you can set up the account in the name of the LLC and link the sole owner's CIF for IRS reporting purposes. That will ensure the name/TIN matches for IRS reporting.
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#1267894 - 10/16/09 02:39 PM Re: CTR on an LLC BrendaC
Kathleen O. Blanchard Offline

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Thanks to both of you. That is basically what I had suggested...use the individual's name for IRS reporting. Glad I was not off the beaten path, on this issue at least.
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#1268390 - 10/16/09 08:03 PM Re: CTR on an LLC Kathleen O. Blanchard
John Burnett Offline
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We'll let you know when you stray, Kathleen! Have a great weekend!
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