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 Buttonwillow, CA

Pros and Cons of Taxation as an LLC in Buttonwillow, CA


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 Buttonwillow, CA
    Klika Parrish & Bigelow
    959 E Walnut St
    Pasadena, CA 91106
    (626) 796-9998
    General Practice Attorneys, Attorneys, Legal Service Plans
    Walton Lorrie A
    2300 E Katella Ave # 435
    Anaheim, CA 92806
    (714) 978-9988
    General Practice Attorneys, Attorneys
    Warshaw Adam
    1918 W Magnolia Blvd # 101
    Burbank, CA 91506
    (818) 972-9927
    Construction Law Attorneys, Attorneys
    Schwartz Law Offices
    9000-S Crow Canyon Road, No. 399
    Danville, CA 94506
    (831) 331-9909
    Bankruptcy Law Attorneys,  Business Litigation Attorneys,  Divorce Attorneys,  Estate Planning Attor
    Kobernick Todd E
    2448 Historic Decatur Rd
    San Diego, CA 92106
    (619) 224-9889
    Attorneys, Legal Service Plans
    Lum A Justin
    1005 E Colorado Blvd # 209
    Pasadena, CA 91106
    (626) 395-9888
    Patent, Trademark & Copyright Law Attorneys, Attorneys, General Practice Attorneys, Legal Service Pl
    Perera J Rex
    900 W 17th St
    Santa Ana, CA 92706
    (714) 550-9830
    Immigration Law Attorneys, Immigration & Naturalization Consultants, Attorneys
    Cero Debts
    1475 S State College Blvd
    Anaheim, CA 92806
    (714) 780-9756
    Attorneys,  Business Bankruptcy Law Attorneys,  Bankruptcy Law Attorneys,  Bankruptcy Services
    Mccabe Patricia
    7100 Hayvenhurst Ave
    Van Nuys, CA 91406
    (818) 907-9726
    Attorneys, Social Security & Disability Law Attorneys, General Practice Attorneys, Legal Service Pla
    David J. Givot
    3780 Kilroy Airport Way Suite 200
    Long Beach, CA 90806
    888-293-0396
    DUI & DWI Attorneys,  Drug Charges Attorneys,  Legal Service Plans,  Criminal Law Attorneys,  Attorn
    Accident Recovery Legal Center Of Northern California
    1184 Monroe St
    Salinas, CA 93906
    (888) 931-9675
    Employee Benefits & Worker Compensation Attorneys,  Accident & Property Damage Attorneys,  Personal
    Aria Law Group A Professional Law Corporation
    260 Sheridan Avenue Suite 200
    Palo Alto, CA 94306
    (650) 391-9630
    Business Law Attorneys,  Personal Injury Law Attorneys,  Estate Planning, Probate, & Living Trusts
    Rosenberg Jas
    1702 N Main St
    Santa Ana, CA 92706
    (714) 953-9561
    General Practice Attorneys, Attorneys
    Matthew C. Mullhofer
    2107 N Broadway
    Santa Ana, CA 92706
    (866) 698-9478
    Attorneys, Tax Attorneys, Real Estate Attorneys, Legal Service Plans, Estate Planning Attorneys
    Niswonger J
    3233 Arlington Ave
    Riverside, CA 92506
    (951) 367-9441
    General Practice Attorneys, Attorneys, Legal Service Plans
    Paralegals Who Care
    12535 Oxnard St Apt 201
    North Hollywood, CA 91606
    (818) 505-9436
    Paralegals
    Joseph P Connolly Inc
    1616 23rd St
    San Pablo, CA 94806
    (510) 234-9436
    General Practice Attorneys, Attorneys
    Peters Carol Atty
    1100 E Green St # 1
    Pasadena, CA 91106
    (626) 793-9383
    Attorneys, Legal Service Plans, Criminal Law Attorneys, Litigation & Tort Attorneys, Estate Planning
    Attorney Assistance
    2100 Embarcadero
    Oakland, CA 94606
    (510) 893-9333
    Attorneys Referral & Information Service, General Practice Attorneys, Attorneys
    Cleveland & Metz
    3890 11th Street
    Riverside, CA 92506
    (951) 275-9262
    Workers Compensation Assistance,  Accident & Property Damage Attorneys,  Employee Benefits & Worker
    Corrons-Hickey & Hickey
    930 W 17th St
    Santa Ana, CA 92706
    (714) 550-9211
    Bankruptcy Services,  Attorneys,  General Practice Attorneys,  Legal Service Plans,  Bankruptcy Law
    We The People
    963 E Colorado Blvd
    Pasadena, CA 91106
    (626) 219-9200
    Paralegals, Legal Document Assistance, Attorneys
    Hurr Lauren S
    19725 Sherman Way
    Winnetka, CA 91306
    (818) 812-9192
    Bankruptcy Law Attorneys, Attorneys
    Sun Raymond
    20 Corporate Park # 155
    Irvine, CA 92606
    (949) 252-9180
    General Practice Attorneys, Attorneys, Legal Service Plans
    12Law.com   |  NASHVILLE, TN USA   |  CONTACT US