12Law Arrow 12Law Arrow  Easy Questions  
12Law Arrow 12Law Arrow Instant Legal Documents
 
 
FINANCIAL & MARITAL

Cohabitation Agreement coming soon!
Separation Agreement coming soon!
No-Fault Divorce coming soon!
Bankruptcy coming soon!
 
 

Pros and Cons of Taxation as an LLC in Auxvasse, MO

Pros and Cons of Taxation as an LLC in Auxvasse, MO


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.

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."

     
    Personalize & Print a Free MO Last Will Create This Document
    Page 1
    Page 2
    Page 3
    Page 4
    Page 5
    Page 6
    Page 7
    Page 8
    Page 9
    Page 10
     
    Personalize & Print a Free MO Living Will Create This Document
    Page 1
    Page 2
    Page 3
    Page 4
    Page 5
    Page 6
    Page 7
    Page 8
    Related Legal Services near Auxvasse, MO
    O'Neill Michael
    100 Saint Francois St Francois
    Florissant, MO 63031
    (314) 830-9289
    Attorneys
    Hood Law Group
    647 E 69th St
    Kansas City, MO 64131
    (816) 326-8314
    Estate Planning, Probate, & Living Trusts, Legal Service Plans, Estate Planning Attorneys, Wills, Tr
    Bottaro, Morefield, Kubin & Yocum, P.C.
    10401 Holmes Rd Ste 480
    Kansas City, MO 64131
    (913) 948-8200
    Accident & Property Damage Attorneys, Personal Injury Law Attorneys, Legal Service Plans
    Kenneth J. Bini P/C?
    1610 Des Peres Rd Ste 360
    Saint Louis, MO 63131
    (314) 862-7805
    General Practice Attorneys, Attorneys, Legal Service Plans
    Douthit Frets Rouse Gentile & Rhodes
    903 E 104th St
    Kansas City, MO 64131
    (816) 941-7600
    Attorneys, Legal Service Plans
    Gilbert Geoffrey M Jr
    2730 N Ballas Rd
    Saint Louis, MO 63131
    (314) 567-7350
    General Practice Attorneys, Attorneys
    McFall Patricia M
    2730 N Ballas Rd
    Saint Louis, MO 63131
    (314) 567-7350
    Attorneys, Labor & Employment Law Attorneys, Litigation & Tort Attorneys, Legal Service Plans
    McMahon Berger
    2730 N Ballas Rd
    Saint Louis, MO 63131
    (314) 567-7350
    Attorneys, Labor Relations Consultants, Labor & Employment Law Attorneys
    Renick, John B - Mc Mahon Berger
    2730 N Ballas Rd Ste 200
    Saint Louis, MO 63131
    (314) 567-7350
    Litigation & Tort Attorneys, Attorneys
    Younger Robert D
    2730 N Ballas Rd
    Saint Louis, MO 63131
    (314) 567-7350
    Attorneys, Legal Service Plans, Labor & Employment Law Attorneys, Litigation & Tort Attorneys
    Missouri Personal Injury Attorney
    11841 Bayberry Ln
    Saint Louis, MO 63131
    (314) 409-7060
    Attorneys,  Accident & Property Damage Attorneys,  Personal Injury Law Attorneys,  Nursing Home Liti
    Stolze Law Office
    11805 Manchester RD
    Saint Louis, MO 63131
    (314) 965-7000
    General Practice Attorneys, Attorneys, Legal Service Plans
    JoAnn C. Donovan
    330 rue St. Francois
    Florissant, MO 63031
    (314) 921-6600
    Family Law Attorneys
    Kallaher Lori Aty
    10450 Holmes Rd
    Kansas City, MO 64131
    (816) 382-6205
    Attorneys
    Sanders Conkright Warren LLP
    1411 E 104th St # 100
    Kansas City, MO 64131
    (816) 942-6100
    Attorneys, Legal Service Plans
    Ramboldt, Joe
    1001 E 101st Ter Suite 170
    Kansas City, MO 64131
    (816) 522-5902
    Attorneys, Estate Planning, Probate, & Living Trusts, Financial Services
    Pierce Law Firm
    6314 Patterson Creek Rd
    Anderson, MO 64831
    (417) 775-5297
    General Practice Attorneys, Attorneys, Legal Service Plans
    Rex Carr Law Firm
    1650 Des Peres Rd Ste 150
    Saint Louis, MO 63131
    (800) 333-5297
    Attorneys, Malpractice Law Attorneys, General Practice Attorneys, Legal Service Plans
    Barry John F Attorney
    10401 Holmes Rd
    Kansas City, MO 64131
    (816) 942-5100
    Attorneys
    Turner John E
    10401 Holmes Rd Ste 450
    Kansas City, MO 64131
    (816) 942-5100
    Attorneys, General Practice Attorneys
    Matthew J. Floyd LLC
    1610 Des Peres Road, Suite 150
    Des Peres, MO 63131
    (314) 686-4529
    Attorneys, Criminal Law Attorneys, General Practice Attorneys, Traffic Law Attorneys, Litigation & T
    Boyle Daniel P
    755 Saint Francois St
    Florissant, MO 63031
    (314) 838-4500
    General Practice Attorneys, Attorneys
    James H Green Law Offices
    9728 Colony Pl
    Kansas City, MO 64131
    (816) 361-4400
    Social Security Consultants & Representatives,  Attorneys,  Social Security Services,  General Pract
    Albair Robert J
    13421 Manchester Rd
    Saint Louis, MO 63131
    (314) 686-4040
    Accident & Property Damage Attorneys,  Wrongful Death Attorneys,  Attorneys,  Personal Injury Law At
    12Law.com   |  NASHVILLE, TN USA   |  CONTACT US