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 Zip Code 91309

Pros and Cons of Taxation as an LLC in Zip Code 91309


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 CA 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 CA 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 Zip Code 91309
    A Servicio De Inmigracion
    4729 Planz Rd
    Bakersfield, CA 93309
    (661) 836-9977
    Immigration Law Attorneys, Immigration & Naturalization Consultants, Attorneys
    McLaughlin Thomas G
    3105 Lone Tree Way # D
    Antioch, CA 94509
    (925) 754-9900
    Attorneys,  Labor & Employment Law Attorneys,  Personal Injury Law Attorneys,  Insurance Attorneys,
    Harry Bryant - Farmers Insurance
    5401 Business Park S Ste 106
    Bakersfield, CA 93309
    (661) 321-9888
    Insurance,  Attorneys,  Homeowners Insurance,  Life Insurance,  Business & Commercial Insurance,  Au
    Tooby Norton
    6333 Telegraph Ave
    Oakland, CA 94609
    (510) 597-9856
    General Practice Attorneys, Attorneys
    Schwartz Paul M
    2004 Cedar St
    Berkeley, CA 94709
    (510) 548-9800
    Attorneys, General Practice Attorneys
    And Justice For All
    8900 Thornton Rd
    Stockton, CA 95209
    (209) 472-9750
    Paralegals
    Munoz Armando Bail Bonds
    6657 45th St
    Riverside, CA 92509
    (951) 782-9688
    Attorneys Referral & Information Service, Attorneys
    Stephens Rand L
    511 W 3rd St
    Antioch, CA 94509
    (510) 232-9335
    Corporation & Partnership Law Attorneys, Attorneys, Labor & Employment Law Attorneys, Legal Service
    Rapid Legal
    14748 Pipeline Ave # B
    Chino Hills, CA 91709
    (909) 597-9177
    Attorneys Referral & Information Service, Legal Service Plans, Attorneys
    Harris E Weinberg Mediation
    1388 Sutter St
    San Francisco, CA 94109
    (415) 674-8884
    Legal Service Plans,  Mediation Services,  Attorneys,  Arbitration Services,  General Practice Attor
    You Got Served - YGS Legal
    4195 Chino Hills Pkwy #354
    Chino Hills, CA 91709
    (909) 815-8681
    Criminal Law Attorneys,  Family Law Attorneys,  Paralegals,  Process Servers,  Insurance Adjusters,
    R. Douglas Delgado Esq-CPA
    5301 Office Park Dr
    Bakersfield, CA 93309
    (661) 325-8677
    Accountants-Certified Public,  Attorneys,  Accounting Services,  Financial Services
    Roggeveen Nguyen & Tran
    3845 Stockdale Hwy
    Bakersfield, CA 93309
    (661) 396-8500
    Attorneys,  Bankruptcy Services,  Legal Service Plans,  Bankruptcy Law Attorneys,  Personal Injury L
    Karlen Cynthia K
    122 Calistoga Rd
    Santa Rosa, CA 95409
    (707) 538-8429
    General Practice Attorneys, Attorneys
    William J Kelly Attny At Law
    2740 Van Ness Ave # 300
    San Francisco, CA 94109
    (510) 741-8334
    Attorneys
    STEVEN JAY BROCK, INC., APLC
    14071 Peyton Drive, #430
    Chino Hills, CA 91709
    (909) 627-8190
    Labor & Employment Law Attorneys, Civil Litigation & Trial Law Attorneys, Business Law Attorneys, Di
    McCormack Sandra
    5330 Office Center Ct
    Bakersfield, CA 93309
    (661) 325-8163
    Attorneys, Legal Service Plans
    Guy Kornblum & Assoc
    1388 Sutter St # 820
    San Francisco, CA 94109
    (415) 440-7800
    Personal Injury Law Attorneys,  Attorneys,  Legal Service Plans,  Business Law Attorneys,  Insurance
    Christopher B. Johnson
    5861 Pine Ave
    Chino Hills, CA 91709
    (888) 503-7615
    Attorneys, Wills, Trusts & Estate Planning Attorneys
    Hobin Richard Law Office
    1011 A St
    Antioch, CA 94509
    (925) 757-7585
    Attorneys,  Probate Law Attorneys,  Accident & Property Damage Attorneys,  Real Estate Attorneys,  W
    Joshi Law Group
    2772 Gateway Road
    Carlsbad, CA 92009
    (619) 822-7566
    Criminal Law Attorneys,  Immigration Law Attorneys,  Personal Injury Law Attorneys,  General Practic
    Craig S Ewing
    4475 Mission Blvd # 233
    San Diego, CA 92109
    (858) 273-7438
    General Practice Attorneys, Legal Service Plans, Attorneys
    Total Attorneys - Bankruptcy
    PO Box 271686
    Bieber, CA 96009
    (530) 231-7343
    Bankruptcy Law Attorneys,  Attorneys,  Banking & Mortgage Law Attorneys,  Bankruptcy Services,  Lega
    Spar Mediation Svc
    3922 Alta Vista Ave
    Santa Rosa, CA 95409
    (707) 544-7279
    Arbitration Services,  Attorneys,  Counseling Services,  Mediation Services,  Legal Service Plans
    12Law.com   |  NASHVILLE, TN USA   |  CONTACT US