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 75447

Pros and Cons of Taxation as an LLC in Zip Code 75447


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 TX 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 TX 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 75447
    Dan Vanderwoude Construction
    7200 N Stemmons Fwy Suite 907
    Dallas, TX 75247
    (214) 390-9902
    Attorneys, Carpenters, Building Contractors
    Igwe Law Firm PC
    1140 Empire Central Dr
    Dallas, TX 75247
    (214) 631-9500
    General Practice Attorneys, Attorneys, Legal Service Plans
    Scott Law Firm
    8004 Chancellor Row
    Dallas, TX 75247
    (214) 951-9292
    General Practice Attorneys, Attorneys, Legal Service Plans
    Carlton Hughes
    8204 Elmbrook Dr
    Dallas, TX 75247
    (214) 920-9277
    General Practice Attorneys, Attorneys
    Joseph Reina & Brian K Bates
    1120 Empire Central Pl
    Dallas, TX 75247
    (214) 905-9100
    Immigration Law Attorneys, Attorneys, Legal Service Plans
    Andrea L Bleau PC
    2110 Boca Raton Dr
    Austin, TX 78747
    (512) 282-8900
    General Practice Attorneys, Attorneys, Title Companies
    Paul Esquivel Law Office
    1140 Empire Central Dr Ste 234
    Dallas, TX 75247
    (214) 631-8472
    Attorneys,  Criminal Law Attorneys,  Family Law Attorneys,  Divorce Attorneys,  Immigration Law Atto
    Rosalind Kelly
    8500 N Stemmons Fwy
    Dallas, TX 75247
    (214) 951-8100
    Attorneys
    Defoyd and Associates
    103 Eastway St
    Galena Park, TX 77547
    (713) 672-7428
    Attorneys, Legal Service Plans
    R J Daniels Law Office
    1341 W Mockingbird Ln
    Dallas, TX 75247
    (214) 638-7388
    General Practice Attorneys, Attorneys
    Turin Olinger & Associates
    8204 Elmbrook Dr Ste 201
    Dallas, TX 75247
    (214) 688-7080
    Administrative & Governmental Law Attorneys, Attorneys
    Citizens Law Firm
    8500 N Stemmons Fwy Ste 6080
    Dallas, TX 75247
    (214) 631-7000
    General Practice Attorneys, Attorneys, Legal Service Plans
    Coffey Mimi
    3098 N Stemmons FWY
    Dallas, TX 75247
    (214) 219-6464
    General Practice Attorneys, Attorneys
    Mathur Law Offices
    2989 N Stemmons Fwy
    Dallas, TX 75247
    (214) 838-6096
    Attorneys,  Immigration & Naturalization Consultants,  Family Law Attorneys,  Labor & Employment Law
    Capshaw Derieux
    114 E Commerce Ave
    Gladewater, TX 75647
    (903) 845-5700
    Attorneys,  Labor & Employment Law Attorneys,  Banking & Mortgage Law Attorneys,  Business Law Attor
    Cantu & Associates Law Offices, P.C.
    8500 N Stemmons Fwy Ste 2075
    Dallas, TX 75247
    (214) 630-5700
    Attorneys, Criminal Law Attorneys, Family Law Attorneys, General Practice Attorneys, Divorce Assista
    Rise Above Ministries
    15150 Nacogdoches Rd
    San Antonio, TX 78247
    (210) 653-5050
    Bankruptcy Law Attorneys
    Immigration Lawyers - Reina & Bates
    1140 Empire Central Dr., Suite 300, 3rd Floor
    Dallas, TX 75247
    (214) 424-5045
    Immigration Law Attorneys
    Irion Jeffrey C Atty
    240 S Old Gun Barrel Ln
    Mabank, TX 75147
    (903) 887-4050
    General Practice Attorneys, Attorneys
    Kenneth Onyenah
    8585 N Stemmons Fwy Ste M25
    Dallas, TX 75247
    (214) 631-3889
    General Practice Attorneys, Attorneys, Legal Service Plans
    Menes Law Firm
    1140 Empire Central Dr Suite 234
    Dallas, TX 75247
    (214) 631-2751
    Attorneys, Criminal Law Attorneys, Family Law Attorneys, Labor & Employment Law Attorneys, Divorce A
    Blomquist III Harry L
    12915 Jones Maltsberger Rd
    San Antonio, TX 78247
    (210) 497-2600
    General Practice Attorneys, Attorneys, Legal Service Plans
    Larrea Faustino
    1220 River Bend Dr Suite 105
    Dallas, TX 75247
    (214) 920-2512
    General Practice Attorneys, Attorneys
    Lui O Akwuruoha Uwakwe
    1140 Empire Central Dr
    Dallas, TX 75247
    (214) 631-2500
    Collection Law Attorneys, Attorneys
    12Law.com   |  NASHVILLE, TN USA   |  CONTACT US