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 Olanta, PA

Pros and Cons of Taxation as an LLC in Olanta, 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 Olanta, PA
    Elman Technology Law PC
    12 Veterans Sq Ste 1
    Media, PA 19063
    (610) 892-9942
    Patent, Trademark & Copyright Law Attorneys, Attorneys, Corporation & Partnership Law Attorneys, Bus
    Dolores J Varga Law Offices
    7 W Baltimore Ave
    Media, PA 19063
    (610) 892-9909
    Attorneys, Family Law Attorneys, Legal Service Plans, Divorce Attorneys
    Scott M. Pollins
    108 Springton Mews Cir
    Media, PA 19063
    (610) 896-9909
    Corporation & Partnership Law Attorneys, Attorneys, Labor & Employment Law Attorneys, Accident & Pro
    Greto Albert M
    319 W Front St
    Media, PA 19063
    (610) 891-9900
    General Practice Attorneys, Attorneys
    Seflin Gary S
    30 W Third St
    Media, PA 19063
    (610) 892-9700
    Attorneys, Legal Service Plans
    Berman Bernard M
    20 W Third St # 1
    Media, PA 19063
    (610) 565-9696
    Accident & Property Damage Attorneys,  Attorneys,  Family Law Attorneys,  Personal Injury Law Attorn
    Precise Inc
    600 N Jackson St Ste 303
    Media, PA 19063
    (610) 565-9544
    Attorneys Referral & Information Service, Legal Service Plans, Attorneys
    Baldo Law Offices
    1215 W Baltimore Pike Ste 2
    Media, PA 19063
    (610) 565-9500
    Personal Injury Law Attorneys, Civil Litigation & Trial Law Attorneys, Attorneys
    Schwartz Marc
    341 W State St # 1
    Media, PA 19063
    (610) 892-9500
    General Practice Attorneys, Attorneys, Legal Service Plans
    Suzanne de Seife, Esquire
    15 E Front St
    Media, PA 19063
    (610) 420-9431
    Divorce Attorneys, Divorce Assistance, Legal Service Plans, Attorneys, Family Law Attorneys, Legal C
    Foehi Gene A
    27 E Front St
    Media, PA 19063
    (610) 892-9307
    General Practice Attorneys, Attorneys, Legal Service Plans
    Brielmann Joseph J
    18 W Front St
    Media, PA 19063
    (484) 326-9220
    Attorneys, Legal Service Plans, Criminal Law Attorneys, Family Law Attorneys, DUI & DWI Attorneys
    Hanna Matthew
    319 W Front St
    Media, PA 19063
    (610) 892-9201
    Attorneys
    Ippoliti Marc D Atty
    334 W Front St
    Media, PA 19063
    (610) 892-9200
    General Practice Attorneys, Attorneys
    Kenneth R. Schuster & Associates, P.C.
    334 W Front St
    Media, PA 19063
    (610) 892-9200
    Attorneys,  Accident & Property Damage Attorneys,  Personal Injury Law Attorneys,  Legal Service Pla
    Donaghue Labrum, LLP
    13 West Third Street
    Media, PA 19063
    (610) 565-9120
    Accident & Property Damage Attorneys,  Attorneys,  Malpractice Law Attorneys,  Personal Injury Law A
    Immigration Service Corp
    327 W Front St
    Media, PA 19063
    (610) 566-9120
    Immigration Law Attorneys, Immigration & Naturalization Consultants, Attorneys
    The Henry Law Firm
    117-119 Olive St.
    Media, PA 19063
    (610) 565-9112
    Criminal Law Attorneys
    Flick James R
    117 N Monroe St
    Media, PA 19063
    (610) 565-9050
    General Practice Attorneys, Attorneys
    Musi Malone & Daubenberger
    21 W Third St
    Media, PA 19063
    (610) 891-8806
    Legal Service Plans, Attorneys, Criminal Law Attorneys, Family Law Attorneys, Labor & Employment Law
    Beatty Jr, Lewis B Beatty Lincke
    334 W Front St
    Media, PA 19063
    (610) 565-8800
    Estate Planning Attorneys,  Attorneys,  Real Estate Attorneys,  Administrative & Governmental Law At
    Attorney Associates
    111 N Olive St
    Media, PA 19063
    (610) 565-8787
    Criminal Law Attorneys, Attorneys, Legal Service Plans
    Elizabeth T Stefanide Law Ofcs
    280 N Providence Rd
    Media, PA 19063
    (610) 566-8686
    Attorneys, General Practice Attorneys, Legal Service Plans, Estate Planning Attorneys
    Sokoloff Jonathan D
    117 N Olive St
    Media, PA 19063
    (610) 891-8570
    General Practice Attorneys, Attorneys
    12Law.com   |  NASHVILLE, TN USA   |  CONTACT US