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 Old Town, FL

Pros and Cons of Taxation as an LLC in Old Town, FL


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 FL 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 FL 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 Old Town, FL
    Mc Neal William D
    170 E Central Ave
    Winter Haven, FL 33880
    (863) 298-9900
    General Practice Attorneys, Attorneys, Legal Service Plans
    Kaylor, David S Kaylor Law Group
    361 E Central Ave
    Winter Haven, FL 33880
    (863) 294-9844
    Insurance Attorneys,  Attorneys,  Criminal Law Attorneys,  Personal Injury Law Attorneys,  Litigatio
    Kelley & Kelley P L
    904 Anastasia Blvd
    Saint Augustine, FL 32080
    (904) 819-9706
    Attorneys, Wills, Trusts & Estate Planning Attorneys, Real Estate Attorneys, Construction Law Attorn
    Brewer, Stephen M PA
    1209 S Washington Ave
    Titusville, FL 32780
    (321) 269-9700
    Family Law Attorneys,  General Practice Attorneys,  Attorneys,  Attorneys Referral & Information Ser
    Ferguson Matthew L
    340 Royal Palm Way # 100
    Palm Beach, FL 33480
    (561) 833-9631
    Real Estate Attorneys, Wills, Trusts & Estate Planning Attorneys, Attorneys
    Mettler Randolph Massey Carroll & Sterlacci
    340 Royal Palm Way
    Palm Beach, FL 33480
    (561) 833-9631
    Wills, Trusts & Estate Planning Attorneys,  Attorneys,  Real Estate Attorneys,  Probate Law Attorne
    Enfield, Theodore
    19235 Biscayne Blvd
    Miami, FL 33180
    (305) 933-9592
    Divorce Attorneys, Attorneys, Family Law Attorneys, Legal Service Plans
    Sonn & Mittelman PA
    2999 NE 191st St
    Miami, FL 33180
    (305) 466-9497
    Real Estate Attorneys, Attorneys
    Divorce & Family Law Attorney Theodore Enfield
    19235 Biscayne Blvd
    Miami, FL 33180
    (305) 529-9377
    Divorce Attorneys
    Denis Fishman
    2999 NE 191st St # 603
    Miami, FL 33180
    (305) 931-9359
    Immigration Law Attorneys, Attorneys, General Practice Attorneys
    Savitt Joel A
    20801 Biscayne Blvd # 506
    Miami, FL 33180
    (305) 936-8844
    Immigration Law Attorneys, Attorneys, General Practice Attorneys, Legal Service Plans
    Clover Lillian
    2323 S Washington Ave
    Titusville, FL 32780
    (321) 267-8833
    Attorneys, General Practice Attorneys
    Rachael Greene
    320 High Tide Drive, Suite 201
    Saint Augustine, FL 32080
    (904) 217-8670
    Attorneys, Family Law Attorneys, Probate Law Attorneys
    Ditocco Law Group
    20801 Biscayne Blvd Ste 403
    Miami, FL 33180
    (305) 444-8660
    Attorneys,  Business Bankruptcy Law Attorneys,  Legal Service Plans,  Bankruptcy Law Attorneys
    Andrews, Stanley R
    2690 S Hopkins Ave
    Titusville, FL 32780
    (321) 267-8621
    Wills, Trusts & Estate Planning Attorneys,  Attorneys,  Family Law Attorneys,  Corporation & Partne
    Blumenthal Schwartz & Saxe PA
    1069 Cheney Hwy
    Titusville, FL 32780
    (321) 267-8614
    Employee Benefits & Worker Compensation Attorneys, Attorneys
    D'Achille Joseph N Jr
    2323 S Washington Ave
    Titusville, FL 32780
    (321) 383-8448
    Attorneys, Criminal Law Attorneys
    Morris Law Group
    20801 Biscayne Blvd
    Miami, FL 33180
    (305) 682-8330
    Elder Law Attorneys, Attorneys
    Desrochers Christopher
    2504 Avenue G NW
    Winter Haven, FL 33880
    (863) 299-8309
    Real Estate Attorneys, Attorneys
    Leslie Robert Evans
    214 Brazilian Ave
    Palm Beach, FL 33480
    (561) 832-8288
    Real Estate Attorneys, Attorneys, Legal Service Plans
    Farah, Chuck Farah & Farah Law Offices
    1301 Plantation Island Dr S # 20
    Saint Augustine, FL 32080
    (904) 797-7977
    Insurance Attorneys,  Attorneys,  Labor & Employment Law Attorneys,  Social Security & Disability La
    Farah, Chuck Farah & Farah Law Offices
    1301 Plantation Island Dr S #206A
    Saint Augustine, FL 32080
    (904) 797-7977
    Insurance Attorneys, Attorneys, Labor & Employment Law Attorneys, Social Security & Disability Law A
    Berlinsky Steven
    634 1st St S
    Winter Haven, FL 33880
    (863) 409-7961
    Bankruptcy Law Attorneys, Attorneys, General Practice Attorneys
    The Roy Law Firm
    435 1st St S
    Winter Haven, FL 33880
    (863) 294-7898
    General Practice Attorneys, Attorneys, Legal Service Plans
    12Law.com   |  NASHVILLE, TN USA   |  CONTACT US