Best Answer

I am assuming each company is in a different business??? Again, seek counsel but the following usually applies:

Form a corporation or LLC. An LLC might be simpler for this purpose. Have the LLC acquire both of the businesses in exchange for Membership Units (LLC's version of stock) which they will issue to you. Each company can be run independently and books kept seperate. However, at the end of the year, the LLC will consolidate their books and file one single tax return with the IRS. Since an LLC is a flow-through entity, all tax liability flows to the Members perportionately. Losses in one business will automatically offset gains in another. Instead of getting a 1099 or W2, you will get a K1 which you will file with your personal return. The K1 will show your allocation (100%) of the gains and losses. A K1 is usually treated as "passive income". This way, losses from a business can be used to offset other personal losses that may not be ordinariliy deductable. The LLC never writes a check to the IRS. You write a check only if you show adjusted gross income.

This is one creative way to avoid IRS noses when consecutively operating a business with ongoing losses which they may otherwise consider a "hobby". They only ever see one consolidated P&L.

To minimize tax liability it is generally best to minimize income. Naturally I would advise visiting an accountant since many factors are involved, but as a general rule, it is best to structure your business to show the least amount of profit possible (legally of course). If the business posting a loss cannot generate a tax deduction in some manner, it does seem fair that it would be best to combine the two so that the loss at least offsets some income elsewhere (hence minimizing your tax liability). I am assuming of course that you own 100% and that there are no conflicting interests involved....

User Avatar

Wiki User

โˆ™ 2015-07-16 18:07:36
This answer is:
User Avatar
Study guides

Resume Writing

20 cards

How do you get my remmittance in social security system

What is the best definition of a targeted resume

What happenes to teenagers who get insufficient sleep

What is the best definition of a special e-version resume

See all cards

Business & Finance

20 cards

An accounting code structure consists of which elements

What must be in place before you create an accounting validation control

How can you link the values of two accounting code segments

How can you set up the system so that cardholders can reallocate only one specific accounting code segment

See all cards


20 cards

What allows only a certain quantity of an item to be imported

Which organization was founded in 1995 to promote trade between nations

Which nations were the world's leading exporting nations during the mid-1990s

Which term is defined as goods sold to other countries

See all cards

Add your answer:

Earn +20 pts
Q: Is it better to combine two businesses for tax purposes if one business is very profitable and one is not profitable?
Write your answer...
Related questions

How and why business combine?

Businesses will combine or merge for many different reasons. The most common reason is for the two businesses to expand their customer base.

What is it called when businesses combine?

when a number of business undertakings combine together for enjoying some benefits, a business combination forms. The contituent units come into an agreement for fixing up the terms and conditions.

Reasons why businesses combine. what are the reasons why they combine?

Businesses combine to ensure that they have a competitive advantage. Some businesses combine in order to compete better against their competitors.

Definition of product based company?

A product based company is a company that uses, electronic transactions for business purposes. They commonly combine both advertising and company products to help create an income for the company.

Glucose is an example of which macromolecule?

Glucose monomers are combined in two different {chemical bonding} configurations. In Plants, for structural purposes, glucose monomers combine to form cellulose. In Animals, for other purposes, glucose monomers combine to form glycogen.

Does the sap enterprise system contain a large number of expansion packs which combine to execute the business management task of an organization?

SAP is a type of software made by German engineers. It uses key business functions of an organization to help the businesses organize and execute tasks more easily.

What illegal economic function causes business firms to combine to prevent competition?

A cartel or monopoly causes business firms to combine to prevent competition.

When businesses combine to create a trust their goal is to?

reduce competition and regulate prices.

Does Verizon wireless offer discounts to small businesses?

Verizon Wireless offers bundles to its small business customers. Bundles combine two or more different services together and allow the customer to receive a discount on those services.

What does utile dulce mean?

to combine business with pleasure

Differences between merger and acquisition?

Merger is when the owners of two separate businesses agree to combine their resources and form a new organisation. Acquisition is is when one business takes control of another by purchasing a controlling interest in it. in simple terms: merger is when 2 businesses come together (i.e. merge) and acquisition is when one takes over another.

What are strategic alliances and collaborative partnerships?

A strategic alliance in the business world might be two companies that sell the same product, coming together to combine businesses in a region. A collaborative partnership is several companies that make different products combining resources to make one product.

What set of processes the combine to yield a profit?

Business Model

Name three resources that partners may combine?

The three resources that partners in business can combine include their technological and business acumen, their finances and their reputation. A well known name can drive in traffic to a lesser known partner.

Must a designer combine a sense of aesthetics with business to be a success?


Curry powder dissolve in water or not?

It mixes with the water, but does not dissolve. There is no need to combine it with water before using it for culinary purposes.

What is it called when two business combine to make a new company?

It's called a merger.

What would be a good choice for second major to combine with Economics?

Business, moving on to MBA.

How does Conjugation differ from reproduction?

Conjugation does not differ from reproduction as it one of the ways of sexual production. This is where the male and female gametes combine for purposes of reproduction.

In 1890 the Sherman Antitrust Act was passed which made it illegal for business firms to combine to prevent competition.?


1890 the Sherman Antitrust Act was passed which made it illegal for business firms to combine to prevent competition.?


Why there is a video card in the CPU?

Simply because of the way businesses, research and development work. Intel has gotten so good at engineering processors, they can also make decent video cards, and they can combine them in ways that are very efficient. Not to mention in ways that are profitable to them. For example, Nvidia and ATI are now making less money on low range graphics cards because Intels are simply better. Intel has taken some of the market away from Nvidia and ATI.

What does the brainstorming tool scamper stand for?

The brainstorming tool known as SCAMPER is an acronym that stands for substitute, combine, adapt, modify, put to other purposes, eliminate, and rearrange.

In 1890 the sherman antitrust act was passed which made it illegal for busisness firms to combine to prevent competition?

The Sherman Anti-Trust Act, passed in 1890, made it illegal for businesses to combine t create monopolies. Monopolies prevented competition and drove prices up for consumers.

What is the purpose of business integration?

The purpose of a business integration is to merge two or more companies into one conglomerate. Sometimes this is used to downgrade staff and combine all or some offices into one.