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 97877

Pros and Cons of Taxation as an LLC in Zip Code 97877


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 OR 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 OR 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 97877
    Hyde-Patton, Kay Leahy Van Vactor & Cox
    188 W B St # N2
    Springfield, OR 97477
    (541) 746-9621
    Attorneys, General Practice Attorneys, Legal Service Plans, Business Law Attorneys, Real Estate Atto
    Spinney Edmund J
    175 W B St
    Springfield, OR 97477
    (541) 988-9399
    General Practice Attorneys, Attorneys
    Robert E Franz
    730 B St
    Springfield, OR 97477
    (541) 741-8220
    General Practice Attorneys, Attorneys
    Thorp Purdy Jewett Urness & Wilkinson PC
    1011 Harlow Rd Suite 300
    Springfield, OR 97477
    (877) 926-7969
    Traffic Law Attorneys,  Automobile Accident Attorneys,  Domestic Violence Attorneys,  Personal Prope
    Thorp Purdy Jewett Urness
    1011 Harlow Rd Ste 300
    Springfield, OR 97477
    (877) 926-7969
    Estate Planning Attorneys, Attorneys, Personal Injury Law Attorneys, Wrongful Death Attorneys, Sexua
    Wurtz Thomas E
    315 5th St
    Springfield, OR 97477
    (541) 746-7641
    Attorneys
    Logan Merwin C
    315 5th St
    Springfield, OR 97477
    (541) 746-7641
    Attorneys
    Atwood Bill
    500 Main St Ste B
    Springfield, OR 97477
    (877) 926-7153
    Probate Law Attorneys,  Attorneys,  Family Law Attorneys,  Wills, Trusts & Estate Planning Attorney
    Huntsberger Thomas
    870 W Centennial Blvd
    Springfield, OR 97477
    (541) 746-6574
    Attorneys, Legal Service Plans
    Johnson Dale C
    1110 18th St Ste 5
    Springfield, OR 97477
    (541) 747-6000
    Attorneys, Labor & Employment Law Attorneys, Social Security & Disability Law Attorneys, Personal In
    Andersen Law
    380 Q St Ste 270
    Springfield, OR 97477
    (541) 632-4132
    Immigration Law Attorneys,  Attorneys,  Business Bankruptcy Law Attorneys,  Bankruptcy Law Attorneys
    David P Rollema
    34030 Plainview Dr
    Shedd, OR 97377
    (541) 491-3704
    Bankruptcy Law Attorneys
    Le Fever Lance A
    1011 Harlow Rd Ste 300
    Springfield, OR 97477
    (541) 747-3354
    Attorneys, Legal Service Plans
    Petitt Murray S
    1011 Harlow Rd Ste 300
    Springfield, OR 97477
    (541) 747-3354
    Attorneys, Legal Service Plans
    Huffman K C
    1011 Harlow Rd Ste 300
    Springfield, OR 97477
    (541) 747-3354
    Attorneys
    Aaaa Legal Clinic
    336 6th St
    Springfield, OR 97477
    (541) 988-1818
    Attorneys
    Maginnis Margaret
    336 6th St
    Springfield, OR 97477
    (541) 988-1818
    Attorneys, General Practice Attorneys, Legal Service Plans
    Leahy Van Vactor, Cox, & Melendy LLP
    223 A St
    Springfield, OR 97477
    (888) 394-1408
    Civil Litigation & Trial Law Attorneys, Attorneys, Criminal Law Attorneys, Family Law Attorneys, Eld
    Corey R. Scott Attorney
    626 B St
    Springfield, OR 97477
    (541) 484-0925
    Attorneys
    Schroeder Ken
    824 A St
    Springfield, OR 97477
    (541) 359-0133
    Attorneys, Tax Return Preparation, Legal Service Plans
    12Law.com   |  NASHVILLE, TN USA   |  CONTACT US