Easy Questions  
Free Legal Documents

Pros and Cons of Taxation as an LLC in Adelphia, NJ

Pros and Cons of Taxation as an LLC in Adelphia, NJ


The critical ingredient is getting off your butt and doing something. It's as simple as that. A lot of people have ideas, but there are few who decide to do something about them now. Not tomorrow. Not next week. But today. The true entrepreneur is a doer, not a dreamer.
 
- Nolan Bushnell


A Limited liability company (LLC) is a "pass-through" entity. The profits and losses of the company pass through the business to the LLC owners or members who report the information on their personal tax returns. No federal income taxes are required. The IRS will treat the LLC as a sole proprietorship or partnership depending on the total members in the company.


Single-Owner LLC

For tax purposes, the IRS treats one-member LLCs as a sole proprietorship. This would mean no taxes for the LLC and no filling of income tax returns with the IRS. Being the owner of an LLC, you will be required to submit a report of the profits or losses on Schedule C with the Form 1040 tax return. When you decide to leave some of the profits in the company's bank account at year's end for future expenses, you will still pay the income tax for that particular money.

Multi-Owner LLCs

Two owners of an LLC, will be treated by the IRS as a partnership. Like the one-member LLC, a co-owned LLC does not pay taxes on business income, but the members will pay taxes based on their share of profits to be reported on their personal income tax returns together with the Schedule E attached. This sharing of profits and losses is called distributive share and should be indicated in the LLC operating agreement.


How an LLC Divides Profits

Profits are distributed to each member depending on his/her percentage interest in the business. If a person owns 60% of the company, he/she will get 60% of the profits and losses. If the company decides to divide up the profits and losses in a way that is not proportionate to the members' percentage interest, it is called a "special allocation."

How to Tax a Member's Distributive Share

The IRS treats LLC members as though they receive their entire distributive share of each year's profits regardless of how much money is actually paid out. The purpose of this IRS rule is for the LLC members to be taxed based on their rightful share of the earnings, even if some of the money is reinvested in the LLC for expansion of the business.

File Form 1065 with the IRS

A co-owned LLC is not required to pay its own income tax but is required by the IRS to file Form 1065. This is an informational return reviewed by the IRS to determine if the members have reported their income correctly. The LLC is also required to provide its members with a Schedule K-1 showing each member's share of profits and losses. The LLC members report this information on their individual Form 1040 with the Scheduled E attached.


Electing Corporate Taxation

An LLC can choose to be treated like a corporation for tax purposes by filing IRS Form 8832. This is helpful if the LLC regularly needs to keep a large amount of profits or "retained earnings" within the company. Corporate taxable income is lower than individual income tax that is usually applied to LLC owners. This can save you and the co-owners money in overall taxes.

Estimating and Paying Taxes

Withholding taxes is not practiced in an LLC because the owners are considered self-employed. With this regard, all LLC members will be responsible for setting aside money intended for taxes based on their share of the profits. They must estimate the amount of money they owe the IRS for the year (and the state if there is a state income tax) and make quarterly payments in April, June, September, and January. Self-Employment Taxes

Since LLC members are considered self-employed, they make Medicare and Social Security payments directly to the IRS on the earnings they derive from the LLC. Owners who are active in the day-to-day operating of the business pay these taxes on their distributive share. The owners who are investors with no operational responsibilities may be exempt from paying these self-employment taxes from their share of the profit.



Expenses and Deductions

What can be considered as deductible expenses that you can "write off" from your business income? Identifying these can significantly lower the profits that you must report to the IRS. Deductible expenses include:

  • Startup costs
  • Automobile and travel expenses
  • Equipment costs
  • Advertising and promotion costs
  • State Taxes and Fees

    In most states the LLC does not pay a state tax, but LLC members pay individual state taxes on their tax returns. In addition, depending on the state where the LLC is located, there may be an annual LLC fee that is not income related. This is known as a "franchise tax", "annual registration fee", or "renewal fee."

     
    Edit, Download, & Print a Free
    New Jersey Last Will
    Page 1
    Page 2
    Page 3
    Page 4
    Page 5
    Page 6
    Page 7
    Page 8
    Page 9
    Page 10
     
    Edit, Download, & Print a Free
    New Jersey Living Will
    Page 1
    Page 2
    Page 3
    Page 4
    Page 5
    Page 6
    Page 7
    Page 8
     
    Edit, Download, & Print a Free
    New Jersey Power of Attorney
    Page 1
    Page 2
    Page 3
    Page 4
    Page 5
    Related Legal Services near Adelphia, NJ
    Banks James
    22-01 Broadway
    Fair Lawn, NJ 07410
    (201) 254-9919
    Attorneys, Legal Service Plans
    Radell Lisa M
    207 S Main St
    Cape May Court House, NJ 08210
    (609) 465-9910
    General Practice Attorneys, Attorneys
    Sandman Richard E
    18 N Main St
    Cape May Court House, NJ 08210
    (877) 568-9854
    Attorneys,  Criminal Law Attorneys,  Family Law Attorneys,  DUI & DWI Attorneys,  Estate Planning At
    Rose Law Firm
    8 Schweid Court
    Fair Lawn, NJ 07410
    (201) 254-9685
    Attorneys, Criminal Law Attorneys, Family Law Attorneys, Divorce Attorneys, Traffic Law Attorneys
    Andrew J. Naideck
    640 Franklin Ave
    Nutley, NJ 07110
    (973) 235-9400
    Real Estate Attorneys,  Attorneys,  Bankruptcy Law Attorneys,  Traffic Law Attorneys
    Michael Makarov
    12-18 River Rd.
    Fair Lawn, NJ 07410
    (201) 773-9399
    General Practice Attorneys, Real Estate Attorneys, Attorneys
    Creative Financial Network (CFN)
    2827 S Broad St
    Hamilton, NJ 08610
    (609) 570-9369
    Credit Repair Service,  Mortgages,  Real Estate Loans,  Marketing Programs & Services,  Banking & Mo
    Zeitlin Theodore PA
    31-00 Broadway
    Fair Lawn, NJ 07410
    (201) 794-9300
    Attorneys, Legal Service Plans
    Boyd William L
    1410 S Broad St
    Trenton, NJ 08610
    (609) 394-8818
    General Practice Attorneys, Attorneys, Legal Service Plans
    Sirota Barry W
    8-14 Saddle River Rd
    Fair Lawn, NJ 07410
    (201) 797-8811
    Attorneys, Legal Service Plans
    Cozine Michael E
    52 Edgewood Ave
    Nutley, NJ 07110
    (973) 667-8600
    Attorneys, Legal Service Plans
    Cicala Law
    640 Franklin Ave
    Nutley, NJ 07110
    (973) 542-8150
    Attorneys, Family Law Attorneys
    Mick Fred
    18 N Main St # A
    Cape May Court House, NJ 08210
    (609) 536-8139
    General Practice Attorneys, Attorneys, Legal Service Plans
    Poserina Jr Robert J
    1029 S Route 9
    Cape May Court House, NJ 08210
    (609) 463-8125
    General Practice Attorneys, Attorneys
    Mc Hugh Andrea P
    1029 S Route 9
    Cape May Court House, NJ 08210
    (609) 463-8125
    General Practice Attorneys, Attorneys
    Usdin Howard M
    12-45 River Rd
    Fair Lawn, NJ 07410
    (201) 791-8070
    Attorneys, Legal Service Plans
    Olsen John F
    247 Franklin Ave
    Nutley, NJ 07110
    (973) 667-7770
    General Practice Attorneys, Attorneys, Legal Service Plans
    Casale Charles J
    396 White Horse Ave
    Trenton, NJ 08610
    (609) 585-7711
    Attorneys, Legal Service Plans
    Jennifer M Mendelsohn, LLC
    16-00 State Rt 208 # Ll1
    Fair Lawn, NJ 07410
    (201) 796-7700
    General Practice Attorneys, Attorneys, Legal Service Plans
    Iozzio Frank J
    15-01 Broadway # 6
    Fair Lawn, NJ 07410
    (201) 791-7640
    Attorneys, Legal Service Plans
    Michael S Harwin Legal Svc
    22-01 Broadway
    Fair Lawn, NJ 07410
    (201) 791-7575
    Attorneys, Legal Service Plans
    Weltman & Moskowitz LLP
    8-14 Saddle River Rd
    Fair Lawn, NJ 07410
    (201) 794-7500
    Attorneys,  General Practice Attorneys,  Legal Service Plans,  Bankruptcy Services,  Bankruptcy Law
    Frank Milton
    4 Saddle River Rd 17
    Fair Lawn, NJ 07410
    (201) 796-7400
    Attorneys, Legal Service Plans
    Joanna D. Brick, Esq.
    1600 State Rt 208
    Fair Lawn, NJ 07410
    (201) 773-6880
    General Practice Attorneys, Attorneys, Legal Service Plans
    12Law.com   |  NASHVILLE, TN USA   |  CONTACT US