LLC property on FAFSA

Hello financial experts. Would really appreciate your help on the subject.

Parents have a small business registered as inc. with just a few employees. Also parents have an LLC which owns the building/property. This property is used solely by the small business as a place of operations. (Property mortgage is halfway paid off) Since small business does not have 100 employees, assets and so on do not need to be reported to FAFSA. Does LLC property need to be reported to FAFSA or not?

Thank you for your time.

Are you applying to any colleges that require the CSS Profile as well.

@BelknapPoint any help the LLC question. @kelsmom ?

Probably…

Just remember, while you don’t need to list the family owned business on the FAFSA, you will need to include it on the Profile. In addition, at some schools, deductions allowed by the IRS for tax purposes for business owners are added back in as income for financial aid calculation purposes.

I’m not an expert on the structures of small family owned businesses, but they can be structured in a number of ways. That much I do know. Hard to say what’s what with yours without knowing exactly how they are structured.

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Thank you very much for your input.

@AlexBravo probably the most important info you need from your parents is the dollar amount they can contribute annually for your college education. This will help you make better informed decisions about where to apply.

I’m hoping @kelsmom and @BelknapPoint will respond.

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If the building/property is titled as part of the business, and if the business is not required to be reported on FAFSA, I would not think that the building/property would be included on FAFSA as part of parent assets. Profile is different … it may need to be reported on Profile, but I’m not well versed on the requirements of Profile.

Thanks @kelsmom There are two separate entities, and the parents control both. The building/real estate belongs to LLC with two members – parents. The small business (S corp) is renting from LLC. (which may not be relevant at all) If I understand correctly, the LLC is technically a business, and the 2 people business owns the building. Therefore, no need to report. Am I right???

If the property and building are only being used by your family’s business, I could see not reporting the asset (as it would be part of the family business). However, if they rent any part of the building to another business, that could change things.

Thank you very much.

Neither entity reportable on FAFSA; both likely will be reportable on profile or for any school using their own form.

If both are pass through entities (I’m assuming the business is an s corp), then the business income will flow through to the personal return and that personal income will be reported.

This might help you and your parents understand the basis for excluding an llc property:

https://finaid.org/fafsa/smallbusiness/

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@politeperson the OP wrote this…so could you explain how this will appear on their tax return?

Why would it appear on their tax return at all if they aren’t receiving personal income from it?

The s corp will file an 1120s. The LLC will file a 1065 partnership return unless they elect to be taxed as an s corp (which would be unusual in this case).

Each entity will then report pass-through income to partners/shareholders on a K-1, which is reported on schedule e of the 1040, flowing through to schedule 1.

At least that’s how I’ve typically seen this sort of arrangement set up. It’s pretty common for the s corp shareholders to set up a separate entity as an llc for real estate.

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thanks