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 San Gabriel, CA

Pros and Cons of Taxation as an LLC in San Gabriel, 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 San Gabriel, CA
    C A Immigration Svc
    1710 S Del Mar Ave
    San Gabriel, CA 91776
    (626) 280-9799
    Immigration Law Attorneys, Attorneys, Immigration & Naturalization Consultants
    Reid Barbara A
    404 E Las Tunas Dr # 202
    San Gabriel, CA 91776
    (626) 287-9664
    General Practice Attorneys, Attorneys, Legal Service Plans
    Vergari & Fu Attorney's
    425 S San Gabriel Blvd
    San Gabriel, CA 91776
    (626) 309-9601
    General Practice Attorneys, Attorneys, Legal Service Plans
    Arcos Carlos
    225 W Fairview Ave
    San Gabriel, CA 91776
    (626) 284-9003
    Attorneys, Legal Service Plans
    Hua Xing Intl Group
    1710 S Del Mar Ave # 201
    San Gabriel, CA 91776
    (626) 288-8890
    Immigration Law Attorneys, Attorneys, Immigration & Naturalization Consultants
    Yang Melanie
    404 E Las Tunas Dr # 203
    San Gabriel, CA 91776
    (626) 284-8832
    General Practice Attorneys, Attorneys, Legal Service Plans
    Chan Anthony P
    1835 S Del Mar Ave
    San Gabriel, CA 91776
    (626) 280-8826
    General Practice Attorneys, Attorneys, Legal Service Plans
    Principal Paralegal Services
    7220 Rosemead Blvd Ste 104
    San Gabriel, CA 91775
    (626) 287-8726
    Paralegals, Legal Document Assistance
    Afzali Dominick K
    317 W Las Tunas Dr # 203
    San Gabriel, CA 91776
    (626) 282-8261
    General Practice Attorneys, Attorneys, Legal Service Plans
    Bobby C Chung Immigration Attorney
    123 S. Mission Drive, Suite D
    San Gabriel, CA 91776
    (626) 642-8066
    Immigration Law Attorneys, Attorneys
    Gaviria Julie R Law Office
    806 E Broadway
    San Gabriel, CA 91776
    (626) 286-8000
    General Practice Attorneys, Attorneys, Legal Service Plans
    Swarovski Law-
    1811 S Del Mar Ave
    San Gabriel, CA 91776
    (626) 572-7777
    Attorneys, Legal Service Plans
    Brown, R Stephen
    110 N Del Mar Ave
    San Gabriel, CA 91775
    (626) 285-7128
    Attorneys,  Personal Injury Law Attorneys,  Wills, Trusts & Estate Planning Attorneys,  Family Law
    Paul Horn
    850 East Las Tunas Drive
    San Gabriel, CA 91776
    (800) 380-7076
    Bankruptcy Law Attorneys, Bankruptcy Services
    Warmuth Scott
    801 E Valley Blvd # 206
    San Gabriel, CA 91776
    (626) 282-6868
    Attorneys,  Immigration Law Attorneys,  Accident & Property Damage Attorneys,  Personal Injury Law A
    Founders Professional Services
    1025 S San Gabriel Blvd
    San Gabriel, CA 91776
    (626) 285-6598
    Immigration Law Attorneys, Attorneys, Immigration & Naturalization Consultants
    Law Office Nhu H Muon
    1228 S San Gabriel Blvd
    San Gabriel, CA 91776
    (626) 286-5988
    Immigration Law Attorneys, Attorneys, General Practice Attorneys
    Murri Evan L
    1710 S Del Mar Ave
    San Gabriel, CA 91776
    (626) 569-4800
    Attorneys, Immigration & Naturalization Consultants, Legal Service Plans, Immigration Law Attorneys,
    USA National Immigration Center
    1710 S Del Mar Ave # 209
    San Gabriel, CA 91776
    (626) 288-4298
    Immigration Law Attorneys, Immigration & Naturalization Consultants, Attorneys
    San Gabriel Wedding Chapels
    1103 S San Gabriel Blvd
    San Gabriel, CA 91776
    (626) 287-1941
    Paralegals
    Atlantic Professional Group
    1103 S San Gabriel Blvd
    San Gabriel, CA 91776
    (626) 287-1941
    Paralegals
    Ta Immigration Services
    230 E Valley Blvd Ste 202
    San Gabriel, CA 91776
    (626) 307-1933
    Immigration Law Attorneys, Attorneys, Immigration & Naturalization Consultants
    West Themis Law A Pro Law Corp
    1811 S Del Mar Ave
    San Gabriel, CA 91776
    (626) 280-1882
    Attorneys, Criminal Law Attorneys, Corporation & Partnership Law Attorneys, Civil Litigation & Trial
    California Superior Immigration
    404 E Las Tunas Dr
    San Gabriel, CA 91776
    (626) 292-1866
    Immigration Law Attorneys, Immigration & Naturalization Consultants, Attorneys
    12Law.com   |  NASHVILLE, TN USA   |  CONTACT US