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 Langeloth, PA

Pros and Cons of Taxation as an LLC in Langeloth, PA


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 PA 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 PA 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 Langeloth, PA
    Amacher Janet E
    311 N Sumneytown Pike
    North Wales, PA 19454
    (215) 699-9995
    Attorneys,  Estate Planning, Probate, & Living Trusts,  Real Estate Attorneys,  Small Business Att
    Amacher Janet E
    311 N Sumneytown Pike # 1A
    North Wales, PA 19454
    (215) 699-9995
    Attorneys, General Practice Attorneys, Estate Planning, Probate, & Living Trusts, Small Business Att
    Kooman Heeter & Gulnac PC
    10385 Rt 322 Marianne Prof Center Ste 1
    Shippenville, PA 16254
    (814) 226-9100
    Attorneys
    Butcher Herbert P
    123 N Franklin St
    Titusville, PA 16354
    (814) 827-9002
    General Practice Attorneys, Attorneys
    Rosenblat Brook
    10763 Pelle Cir
    Philadelphia, PA 19154
    (215) 632-8087
    Criminal Law Attorneys
    10551 Decatur Partnership
    10551 Decatur Rd
    Philadelphia, PA 19154
    (215) 632-6711
    Cantorna, Bernard F Bryant & Cantorna PC
    107 E Main St
    Millheim, PA 16854
    (814) 349-5666
    Personal Injury Law Attorneys, Attorneys
    Bryant & Cantorna PC
    107 E Main St
    Millheim, PA 16854
    (814) 349-5666
    Personal Injury Law Attorneys, Attorneys
    O'Connell Daniel H Sr ESQ
    114 N Main St
    North Wales, PA 19454
    (215) 699-5600
    General Practice Attorneys, Attorneys, Legal Service Plans
    Minersville Hi Rise
    300 Lewis St
    Minersville, PA 17954
    (570) 399-5491
    Bankruptcy Law Attorneys
    Mc Allister Michael
    12800 Townsend Rd
    Philadelphia, PA 19154
    (215) 934-5206
    Attorneys, Legal Service Plans
    Halcovage Michael P
    240 Sunbury St
    Minersville, PA 17954
    (570) 544-4567
    Accident & Property Damage Attorneys,  Attorneys,  Corporation & Partnership Law Attorneys,  Busines
    Rosemary R Ferrino
    1501 Lower State Rd Building "D"
    North Wales, PA 19454
    (215) 283-4444
    General Practice Attorneys, Attorneys, Legal Service Plans
    Allen Stephen Atty
    2000 Creek Ln
    Green Lane, PA 18054
    (215) 234-2905
    General Practice Attorneys, Attorneys
    Shuffstall II Dearald W
    314 S Franklin St # 201
    Titusville, PA 16354
    (814) 827-2789
    Attorneys
    Scales Kemp C
    115 S Washington St # 206
    Titusville, PA 16354
    (814) 827-2788
    General Practice Attorneys, Attorneys, Legal Service Plans
    Mark Mussina
    999 N Loyalsock Ave
    Montoursville, PA 17754
    (570) 368-2767
    Attorneys
    Rothschild Tamera Ochs
    318 W Spring St
    Titusville, PA 16354
    (814) 827-2760
    Estate Planning Attorneys,  Attorneys,  Bankruptcy Law Attorneys,  Legal Service Plans
    Law Offices
    426 Broad St
    Montoursville, PA 17754
    (570) 368-1999
    General Practice Attorneys, Attorneys
    Leslie Wizelman
    PO Box 500
    Wysox, PA 18854
    (570) 265-1800
    Wills, Trusts & Estate Planning Attorneys, Attorneys, Elder Law Attorneys, Legal Service Plans
    Mcintyre, Edward J Edward J Mc Intyre Law Offices
    206 W Spring St
    Titusville, PA 16354
    (814) 827-1480
    Attorneys, Criminal Law Attorneys, Family Law Attorneys, Divorce Attorneys, General Practice Attorne
    Family Law Ctr
    108 W Walnut St
    North Wales, PA 19454
    (215) 661-1188
    Attorneys
    Fairlie & Lippy, P.C.
    1501 Lower State Rd Ste 304
    North Wales, PA 19454
    (215) 997-1000
    Civil Litigation & Trial Law Attorneys,  Criminal Law Attorneys,  DUI & DWI Attorneys,  Personal Inj
    Liederbach Hahn Foy & Petri
    892 2nd Street Pike
    Richboro, PA 18954
    (215) 677-0919
    General Practice Attorneys, Attorneys, Legal Service Plans
    12Law.com   |  NASHVILLE, TN USA   |  CONTACT US